Assume a Firm Has an Ongoing Need for a Machine,and

question 11

Multiple Choice

Assume a firm has an ongoing need for a machine,and the current machine is operating efficiently.The firm should plan to replace this machine when it

• A)reaches the end of its depreciable life.
• B)is fully paid for.
• C)reaches a point where the book value is less than half of the original cost.
• D)can be replaced with a machine that has a lower equivalent annual cost.
• E)can be sold at a price that exceeds the current book value.

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Definitions:

Produced

The quantity of goods or services created by a business or production process within a certain period.

Actual Costs

The real costs incurred in the production, acquisition, or realization of goods and services, as opposed to estimated or standard costs.

Direct Materials Price Variances

The difference between the actual cost of direct materials and the standard cost, used to measure cost management efficiency.

Quantity Variances

Differences between the expected and the actual amount of materials, labor, or overhead used in production.