Sonor Systems Undertakes Its Own Machine Maintenance

question 156

Multiple Choice

Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units. What is the total maintenance cost per unit produced?

• A)$0.55
• B)$4.20
• C)$5.50
• D)$5.70

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Definitions:

Market Value

The market's current rate for transactions involving the purchase or sale of an asset or service.

Appraisal

The process of professionally estimating the value of a property, often used for taxation or sale purposes.

Purchase Price

The amount of money paid to buy a product or service, including any additional charges.

Business Entity Assumption

A principle that requires a business to be accounted for separately from its owner or other businesses, ensuring that the company's financial statements reflect only its own operations and financial position.