A Factory Machine Was Purchased for $90,000 on January 1

question 113

Multiple Choice

A factory machine was purchased for $90,000 on January 1, 2011.It was estimated that it would have a $18,000 residual 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 2011.If the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2011 would be

• A)$9,000.
• B)$14,400.
• C)$18,000.
• D)$7,200.

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Definitions:

Four-Firm Concentration Ratio

An economic measure that assesses the concentration and competitive landscape of an industry by adding the market shares of the four largest firms.

Merged

The combining of two or more entities into one, through acquisitions or consolidations.

Herfindahl Index

An economic indicator used to assess the level of concentration and competition within an industry, calculated by summing the squares of the market shares of all firms in the market.

Four-Firm Concentration Ratio

An indicator measuring the total market share controlled by the four largest firms within an industry, used to assess the level of competition.