Magpie Ltd Purchased a Building on a Prime Central Business

question 47

Multiple Choice

Magpie Ltd purchased a building on a prime central business district site for $800,000.The value of the land is considered to be $350 000.The useful life of the building is expected to be 25 years after Magpie Ltd spends a further $80 000 on improvements.The residual value of the building at that time is estimated to be $60 000.The benefits from owning the land and building are expected to be derived evenly.What is the appropriate annual depreciation charge?

• A) $18 800
• B) $32 800
• C) $15 600
• D) $14 000

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Definitions:

Total Variable Cost

The overall expenses that change in proportion to the level of production or business activity.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, showing the cost of fixed resources per unit of output.

Total Fixed Costs

Expenses incurred by a business that do not vary with the level of production or sales, including lease payments and salaries of permanent staff.

Total Variable Costs

The sum of all costs that vary with the level of production, including materials and labor.