Reference: 24_01
a Company Is Planning to Purchase a Machine

question 33

Multiple Choice

Reference: 24_01
A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below.
$\begin{array}{llr}\text{Sales} & & \$ 90,000 \\\text{Costs:} & & \\\text{Manufacturing} & \$ 52,000 \\ \text{Depreciation on machine} & 4,000 \\ \text{Selling and administrative expenses} & 30,000 & \underline{(86,000) }\\\text{Income before taxes} & & \$ 4,000 \\\text{Income tax \(50 \%\) } & & \underline{(2,000) }\\\text{Net income} & & \bold{\underline{\$ 2,000}}\end{array}$
-What is the accounting rate of return for this machine?

• A) 33.3%
• B) 16.7%
• C) 50.0%
• D) 8.3%
• E) 4%

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Definitions:

Telephone Interview

A method of conducting a job interview or survey over the phone to assess the qualifications or opinions of the interviewee.

Employment Interviews

Formal meetings between a job applicant and a potential employer to assess the applicant's suitability for a position.

Question-and-answer Phase

A period during which inquiries are made and responses are given, often in a formal setting like an interview or presentation.

Employment Interviews

Formal meetings between a job applicant and an employer to assess the applicant's suitability for a position.