You Are Considering Adding a Microbrewery onto One of Your

question 30

Multiple Choice

You are considering adding a microbrewery onto one of your firm's existing restaurants.This will entail an investment of $40,000 in new equipment.The new equipment falls under asset class 43 and has a capital cost allowance (CCA) rate of 30%.If your firm's marginal corporate tax rate is 35%,then what is the value of the microbrewery's CCA tax shield in the first year of operation?

• A)$2100
• B)$14,000
• C)$5200
• D)$26,000
• E)$6000

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Definitions:

Cost Accounting System

A system of accounting for operations that captures and records all costs associated with production activities to evaluate efficiency and manage expenses.

Manufacturing Costs

All expenses directly involved in the production of goods, including raw materials, labor, and factory overhead.

Unit of Product

A single item or article that has been produced or is planned to be produced in a manufacturing or production process.

Underapplied Overhead

A situation where the allocated manufacturing overhead costs are less than the actual overhead costs incurred.