Saint Paul Company Owns a Fixed Asset with an Original

question 47

Multiple Choice

Saint Paul Company owns a fixed asset with an original cost of $100,000.The company estimates it will use the fixed asset for four years,at which time it will be sold for $10,000.The company uses straight-line depreciation.The book value of the fixed asset after three years of use is ________.

• A) $22,500
• B) $25,000
• C) $32,500
• D) $35,000

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable costs have been deducted, indicating how much contributes to covering fixed costs and generating profit.

Variable Expense Ratio

A financial metric that measures variable costs as a percentage of sales, reflecting how those costs fluctuate with production output.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in sales volume, indicating the level of fixed costs in the business structure.

Sales Commissions

Payments made to sales personnel based on sales volume or value, serving as an incentive for increased sales performance.