Fast Cars Is Considering a Project That Requires $138,000 of Fixed

question 36

Multiple Choice

Fast Cars is considering a project that requires $138,000 of fixed assets that are classified as 5-year property for MACRS. What is the book value of these assets at the end of year 3? The MACRS allowance percentages are as follows, commencing with year one: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.

• A) $34,210
• B) $36,667
• C) $39,744
• D) $40,450
• E) $41,504

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Definitions:

Average Variable Costs

Represent the total variable costs (costs that change with production volume) divided by the number of units produced.

Average Variable Cost

The variable cost per unit of output, calculated by dividing total variable costs by the quantity of output produced.

Output

The quantity of goods or services produced in a given time period by a firm, industry, or country.

Total Variable Cost

The sum of all costs that vary with output level, including expenses such as labor and raw materials, but not fixed costs like rent.