​Use the Following Setup for Question

question 27

Multiple Choice

​Use the following setup for question
A cloth manufacturing firm is deciding whether or not to invest in new machinery.The machinery costs $45,000 and is expected to increase cash flows in the first year by $25,000 and in the second year by $30,000.The firm's current fixed costs are $9,000 and current marginal cost are $15.The firm currently charges $18 per unit.
-​A pottery craftsman is debating attending the crafters fair.It costs $50 to set up the booth and $20 in transportation to get his pottery to the fair.He nets $5 for each of his pieces,number of pots he must sell to make going to the fair worth the cost?

• A)​10
• B)12
• C)14
• D)​16

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Definitions:

Equipment

Tangible assets used in the operations of a business, often having a useful life longer than one year.

Accumulated Depreciation

The aggregate depreciation charged against a tangible asset over its useful life to represent wear and tear.

Income Summary

An account used in the closing process that summarizes the revenues and expenses for a fiscal period, determining the net income or loss.

Owner's Capital

The total value of equity that a business owner has invested in their company, which may increase through profits or additional contributions.