A Machine That Costs $180,000 Is Expected to Generate $40,000

question 106

Multiple Choice

A machine that costs $180,000 is expected to generate $40,000 in cost savings annually for five years.The terminal value at the end of five years is $10,000.Assume straight-line depreciation is used.Ignore income taxes.What is the payback period?

• A) 3.00 years
• B) 4.00 years
• C) 4.20 years
• D) 4.50 years

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Definitions:

Electricity Rate

The price per unit of electric power, which can vary depending on the supplier, region, and the structure of the pricing plan.

Overhead Cost Performance Report

A document that analyzes the overhead costs incurred by a company, comparing budgeted amounts to actual expenses.

Significant Overhead Variances

Large differences between the budgeted overhead costs and the actual overhead costs incurred, indicating inefficiencies or inaccuracies in budgeting or operations.

Flexible Overhead Budget

A budget that adjusts overhead costs based on changes in activity levels or other factors, allowing for more accurate cost management.