Janko Wellspring Inc

question 46

Multiple Choice

Janko Wellspring Inc.has a pump with a book value of $24,000 and a four-year remaining life.A new,more efficient pump,is available at a cost of $45,000.Janko can also receive $8,000 for trading in the old pump.The new pump will reduce variable costs by $10,000 per year over its four-year life.The costs not relevant to the decision of whether or not to replace the pump are:

• A)$40,000.
• B)$8,000.
• C)$10,000.
• D)$24,000.
• E)$16,000.

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Definitions:

Unit Product Cost

The total cost to produce one unit of product, including materials, labor, and overhead.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated prior to the start of the accounting period based on estimated costs and activity levels.

Job-Order Costing

An accounting method used to assign costs to specific batches or orders of goods, often used in manufacturing for custom products.

Total Job Cost

The cumulative costs of materials, labor, and overhead assigned to a specific job or project.