A Factory Has a Machine Costing $76 000

question 57

Multiple Choice

A factory has a machine costing $76 000. It has a 5- year life and an estimated capacity of 160 000 parts. The residual value of the machine is zero. Assume 35 000 parts are machined in the first year of operation. Using the units- of- production method, what is the depreciation expense in Year 1?

• A)$16 625
• B)$15 200
• C)$14 187
• D)$12 160

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Definitions:

Straight-Line Depreciation

A strategy for apportioning the cost of an asset consistently throughout its period of use.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of value maximization.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in an equal amount each year.

Capital Budgeting

Capital budgeting involves the evaluation and selection of long-term investments that are expected to generate cash flows and contribute to a company's growth.