A Company Buys a Machine for $76,000 That Has an Expected

question 29

Multiple Choice

A company buys a machine for $76,000 that has an expected life of 6 years and no salvage value.The company anticipates a yearly after tax net income of $1,805.What is the accounting rate of return?

• A)2.85%.
• B)4.75%.
• C)6.65%.
• D)9.50%.
• E)42.75%.

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Definitions:

Manufacturing Overhead

Refers to all the indirect costs associated with producing goods, such as utilities, maintenance, and salaries for managers.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products based on a set formula, before the actual costs are known.

Manufacturing Overhead

All indirect costs associated with the production process, including utilities, maintenance, and factory management salaries, which cannot be directly traced to individual products.

Job Costing

An accounting method used to track costs and revenues by job or project, typically applied in industries that produce unique products or offer services tailored to specific customer requirements.