ABC Already Spent $85,000 on a Feasibility Study for a Machine

question 25

Multiple Choice

ABC already spent $85,000 on a feasibility study for a machine that will produce a new product. The machine will cost $2,575,000. Required modifications will cost $375,000. ABC will need to invest $75,000 for additional inventory. The machine has an IRS approved useful life of 7 years; it is presumed to have no salvage value. It will only be operated for 3 years, after which it will be sold for $600,000. What is the depreciable cost basis of the machine?

• A) $3,025,000
• B) $2,950,000
• C) $2,575,000
• D) $2,350,000

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Definitions:

Estimate Of Units

A quantification or approximation of the number of units needed or produced, used in planning and analysis processes.

Self-Performing Work

A scenario in which a company uses its own workforce to execute a specific portion of a project, rather than subcontracting the work.

Outsourcing Work

The practice of hiring external entities or individuals to perform tasks or services that could be handled internally.

Benefits And Risks

The potential advantages and challenges associated with a project, which are considered during the planning process.