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%

Determine equivalent units for materials and conversion costs using the weighted-average method.

Calculate cost per equivalent unit for materials and conversion costs.

Analyze the impact of beginning and ending work in process inventory on equivalent unit calculations.

Understand the processing flow and costing in multi-department manufacturing environments.

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Definitions:

Histogram

A graphical representation of data distribution through a series of bars, with each bar representing the frequency of data in certain intervals.

Illinois

A state located in the Midwestern region of the United States, known for its significant agricultural productivity and major cities like Chicago.

Tornadoes

Violently rotating columns of air touching the ground, usually attached to a cumulonimbus cloud.

Unimodal

Refers to a distribution with a single peak or mode.