A Machine Cost $15,000 to Install,and Has a Resale Value

question 35

Multiple Choice

A machine cost $15,000 to install,and has a resale value one year later of $12,000.If the real interest rate is 10%,then the user cost of capital is ________.

• A)$4,500
• B)$1,500
• C)$3,000
• D)$1,200

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Definitions:

Net Operating Income

The profit a company makes from its usual business operations, before taxes and interest, calculated by subtracting operating expenses from revenue.

Machine-Hours

A measure of production time used in cost accounting that quantifies the hours a machine is operated.

Variable Overhead

Variable overhead refers to costs that fluctuate with production levels, such as utilities or materials used in production that can vary with output.

Efficiency Variance

The difference between the actual costs incurred and the standard costs for the actual level of production activity, indicating efficiency in resource usage.