Information About a Project Wagner Company Is Considering Is as Follows

question 56

Multiple Choice

Information about a project Wagner Company is considering is as follows: The property is considered 5-year property for tax purposes.The company plans to use MACRS and dispose of the property at the end of the sixth year; no salvage value is expected.Assume all cash flows occur at the end of the year.Round amounts to dollars.
The tax savings from depreciation in Year 2 would be

• A) $48,000.
• B) $64,800.
• C) $76,800.
• D) $82,400.

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Definitions:

Contribution Margin Ratio

The percentage of sales revenue that exceeds variable costs, indicating how much contributes to covering fixed costs and generating profit.

Variable Expenses

Variable expenses are costs that vary directly with changes in production levels or business activity, such as materials and labor.

Contribution Margin

The amount remaining from sales revenue after all variable expenses have been deducted.

Traceable Fixed Expenses

Fixed costs that can be directly associated with a specific business segment or product, aiding in accurate financial analysis and decision-making.