Reference: 24_01
a Company Is Planning to Purchase a Machine

question 33

Multiple Choice

Reference: 24_01
A company is planning to purchase a machine that will cost $24,000, have a six-year life, and be depreciated using the straight-line method with no salvage value. The company expects to sell the machine's output of 3,000 units evenly throughout each year. A projected income statement for each year of the asset's life appears below.
$\begin{array}{llr}\text{Sales} & & \$ 90,000 \\\text{Costs:} & & \\\text{Manufacturing} & \$ 52,000 \\ \text{Depreciation on machine} & 4,000 \\ \text{Selling and administrative expenses} & 30,000 & \underline{(86,000) }\\\text{Income before taxes} & & \$ 4,000 \\\text{Income tax \(50 \%\) } & & \underline{(2,000) }\\\text{Net income} & & \bold{\underline{\$ 2,000}}\end{array}$
-What is the accounting rate of return for this machine?

• A) 33.3%
• B) 16.7%
• C) 50.0%
• D) 8.3%
• E) 4%

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Definitions:

Weapons Effect

The phenomenon where the mere presence of a weapon can increase the likelihood of aggression or violence.

Violent Media

Media content that depicts acts of physical aggression by one character against another or against oneself.

Viewer Aggression

The tendency for individuals to display aggressive behaviors after being exposed to violent content in media or entertainment.

Causality

The relationship between cause and effect, where one event (the cause) leads to the occurrence of another event (the effect).