Use the Information for the Question(s)below

question 6

Multiple Choice

Use the information for the question(s) below.
Shepard Industries is evaluating a proposal to expand its current distribution facilities.Management has projected the project will produce the following cash flows for the first two years (in millions) .

-The depreciation tax shield for Shepard Industries project in year 2 is closest to:

• A)$84
• B)$196
• C)$72
• D)$96

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Definitions:

Traceable Fixed Expense

Fixed costs that can be directly linked to a specific segment of the business, and would disappear if the segment did.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remains constant regardless of the level of production.

Variable Costing

An accounting method that considers only variable production costs (costs that change with the level of output) in the calculation of product costs.

Unit Product Cost

The total cost associated with producing one unit of a product, including both variable and fixed costs.