Your Firm Needs a Computerized Machine Tool Lathe Which Costs

question 59

Multiple Choice

Your firm needs a computerized machine tool lathe which costs $50,000 and another $12,000 in maintenance for each year of its 3-year life. After 3 years, this machine will be replaced. The machine falls into the MACRS 3-year class life category. Assume a tax rate of 30% and a discount rate of 12%. If the lathe can be sold for $6,000 at the end of year 3, what is the after-tax salvage value?

• A) $3,470.50
• B) $4,344.50
• C) $5,499.50
• D) $5,311.50

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Definitions:

Special Order

A one-time order that is not usually part of the company's normal ongoing operations, often requiring special pricing or terms.

Markup

The uplift in the purchase price of items specifically to recover operational overhead and to make a profit.

Split-off Point

The stage in a production process where multiple products are derived from a single process or material, leading to separate further processing.

Joint Production Costs

Costs incurred in the process of producing two or more products simultaneously from the same raw materials or process.