Figure 3-1 Sonor Systems Undertakes Its Own Machine Maintenance

question 127

Multiple Choice

Figure 3-1 Sonor Systems undertakes its own machine maintenance. The depreciation on the equipment is $20,000 per year and operating cost is $2 per machine hour. Last year 275,000 machine hours were used to produce 100,000 units.
See Figure 3-1. Develop a cost equation for the total machine maintenance cost.

• A) Y= $275,000
• B) Y = $20,000
• C) Y = $20,000 + $2 MHR
• D) Y = $2 MHR

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Definitions:

Maturity Value

The amount to be paid to the holder of a financial instrument at the end of its term, including the principal and any accumulated interest or dividends.

Compounded Semi-annually

A method of calculating interest where the interest is added to the principal twice a year.

Strip Bond

A type of bond investment where the coupon payments and the principal are separated and sold individually as zero-coupon instruments.

Yield Rate

The annual income return on an investment, expressed as a percentage of the investment's price.