A Factory Machine Was Purchased for $375,000 on January 1

question 257

Multiple Choice

A factory machine was purchased for $375,000 on January 1, 2018. It was estimated that it would have a $75,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. The company ran the machine for 4,000 actual hours in 2018. If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2018 would be

• A) $37,500.
• B) $60,000.
• C) $75,000.
• D) $30,000.

Assess the impact of different costing methods (variable costing and absorption costing) on financial performance.

Recognize the role and calculation of contribution margin in decision making.

Identify the importance of determining cost objects in the costing process.

Grasp the significance and method of estimating the denominator volume for overhead rate computation.

---

Definitions:

UCC

Uniform Commercial Code, a set of laws that provide legal rules and regulations governing commercial or business dealings and transactions in the United States.

Shipment Contract

A contract where the seller is required to send the goods to the buyer, but the title to the goods passes when the seller fulfills their obligation to ship.

Carrier

An entity that provides transportation services for goods or individuals.

Destination

The destination where a person or an item is headed or directed.