Orange Corp

question 54

Multiple Choice

Orange Corp. constructed a machine at a total cost of $70 million. Construction was completed at the end of 2009 and the machine was placed in service at the beginning of 2010. The machine was being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $4 million. At the beginning of 2013, Orange decided to change to the straight-line method. Ignoring income taxes, what will be Orange's depreciation expense for 2013?

• A)$4.8 million.
• B)$5.4 million.
• C)$6.6 million.
• D)$9.4 million.

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Definitions:

Income Increase

A rise in the amount of money earned from various sources, including work, investments, or business operations.

Variable Costing

A costing method that includes only variable costs—costs that change with production levels—in the calculation of product costs.

Net Income

The total profit of a company after subtracting all expenses from total revenues, reflecting the company's financial performance over a given period.

Contribution Margin

The amount by which a product's sales price exceeds its total variable costs, used to cover fixed costs and generate profit.