Tara Purchased a Machine for $40,000 to Be Used in Her

question 47

Multiple Choice

Tara purchased a machine for $40,000 to be used in her business.The cost recovery allowed and allowable for the three years the machine was used are as follows: If Tara sells the machine after three years for $15,000,how much gain should she recognize?

• A)$3,480.
• B)$6,360.
• C)$9,240.
• D)$11,480.
• E)None of the above.

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Definitions:

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that remains constant regardless of the level of production.

Variable Costing

An accounting method that considers only variable production costs (costs that change with the level of output) in the calculation of product costs.

Unit Product Cost

The total cost associated with producing one unit of a product, including both variable and fixed costs.

Variable Costing

An accounting method that includes only variable production costs (direct labor, direct materials, and variable manufacturing overhead) in product costs.