Bing's Export Co. Bing's Export Co. Purchased a New Delivery Truck at the Truck

question 53

Multiple Choice

Bing's Export Co.
Bing's Export Co. purchased a new delivery truck at the beginning of 2015. The truck has a cost of $37,000, an estimated life of 5 years, and an estimated residual value of $7,000. A full year's depreciation expense is to be recorded in 2015. The truck was driven 20,000 miles during 2015 and 24,000 miles during 2016. The number of expected miles over five years is 100,000.
-Refer to information for Bing's Export Co. Bing's is comparing the straight­line and double­declining­balance depreciation methods. Of these two methods,
Which method creates the larger expense and larger tax savings in 2015?

• A) Straight-line depreciation creates the larger expense, while double-declining-balance depreciation creates the larger tax savings.
• B) Straight-line depreciation creates both the larger expense and the larger tax savings.
• C) Double-declining-balance depreciation creates both the larger expense and the larger tax savings.
• D) Double-declining-balance depreciation creates the larger expense, while straight-line depreciation creates the larger tax savings.

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Definitions:

Direct Labor Budget

Direct labor budget is a financial plan that estimates the cost of direct labor required to meet production goals, detailing the amount and cost of the labor necessary for a specific period.

Labor-Hours Per Unit

Labor-hours per unit measures the amount of labor time required to produce one unit of a product.

Direct Labor Rate

The hourly wage rate paid to workers who are directly involved in manufacturing or producing goods.

Production Budget

A plan detailing the quantity of each product a company aims to produce within a specific timeframe, factoring in projected sales and inventory requirements.