A Firm Is Considering Purchasing an Asset That Will Cost

question 81

Multiple Choice

A firm is considering purchasing an asset that will cost $5 million. Other depreciable costs include $800,000 in installation costs. If the asset is classified in the 5-year class, what is the annual depreciation for years 1, 3, and 6 for this asset, using the fixed depreciation percentages given by MACRS? (The percentages are 20.00%, 19.20%, 5.76%, and 8.93%, respectively.)

• A) $1,856,000, $1,113,600, and $334,080 for years 1, 3, and 6, respectively
• B) $1,160,000, $1,113,600, and $334,080 for years 1, 3, and 6, respectively
• C) $1,160,000, $1,113,600, and $668,160 for years 1, 3, and 6, respectively
• D) $5,800,000, $1,160,000, and $1,113,600 for years 1, 3, and 6, respectively

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Definitions:

Standard Costs

Predetermined or estimated expenses that are often used to measure and control the cost of producing a product or performing a service.

Management Tool

A management tool is any device, technique, or software used to manage an organization's processes, resources, or data effectively.

Fixed Factory Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs attributed to a variation in produced units volume.

Supervisors

Individuals who have the responsibility to oversee and direct the work of others, ensuring that tasks are completed effectively and efficiently.