The Martin Car Company Is Considering Whether to Continue to Make

question 1

Multiple Choice

The Martin Car Company is considering whether to continue to make the tires for its cars, or to buy tires from Swift Corp. Which of the following would be considered a "sunk cost" with regard to this decision?

• A) The cost per unit it would pay to buy tires from Swift Corp
• B) The costs it had incurred two years ago to design its own tires
• C) The variable labor costs it incurs in making its own tires
• D) The labor costs it incurs in making its own tires

Define plant assets and the primary issues in accounting for them.

Calculate and record the expense related to the acquisition and disposal of plant assets.

Apply the straight-line, double-declining-balance, and units-of-production methods of depreciation.

Determine the cost allocation for assets purchased as a lump sum.

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Definitions:

Net Present Value

A method used in finance to calculate the value of a series of future cash flows in today's dollars.

Percentage-of-Completion

An accounting method used to recognize revenues and expenses of long-term contracts as a percentage of work completed during the period.

Revenue Recognition

The accounting principle defining the specific conditions under which revenue is recognized or recorded.

Tax Havens

Countries with no or low corporate taxes.