[The Following Information Applies to the Questions Displayed Below

question 72

Multiple Choice

[The following information applies to the questions displayed below.]

Farmer Company purchased equipment on January 1, Year 1 for $82,000. The machines are estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method.


-If the original expected life remained the same (i.e. ,5-years) ,but at the beginning of Year 4,the salvage value was revised to $8,000,what is the annual depreciation expense for each of the remaining years?

• A)$5,440
• B)$27,200
• C)$13,600
• D)$14,800

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Definitions:

Total Cost

The sum of all costs associated with the production of a specific quantity of a good or service, including both fixed and variable costs.

ATC

Average Total Cost, a financial metric calculated by dividing total cost by the quantity of output produced, illustrating the average cost per unit of output.

AVC

Average Variable Cost is the total variable costs divided by the quantity of output produced.

AFC

Average Fixed Cost, the fixed cost per unit of output, calculated by dividing total fixed costs by the quantity produced.