Van Meter Company Is Considering the Purchase of the Following

question 67

Multiple Choice

Van Meter Company is considering the purchase of the following computer equipment, which is considered 5-year property for tax purposes:
- Van Meter plans to use MACRS and keep the production equipment for seven years.(Round amounts to dollars.)
The MACRS deduction in Year 2 would be

• A) $172,000.
• B) $170,000.
• C) $160,000.
• D) $140,000.

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Definitions:

Variable Manufacturing Overhead

This refers to the manufacturing overhead costs that vary with the level of production, such as utilities or indirect materials.

Materials Price Variance

The variance between the standard cost and the actual expense of materials, factored by the number of materials acquired.

Direct Labor-hours

The total time that production workers spend working on products or production processes, used as a base for applying manufacturing overhead.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost of variable overhead expected for the actual production level.