Brandon's Enterprises has purchased a new machine tool which will allow the company to improve the efficiency of its operations. On an annual basis, the machine will produce 12,000 units with an expected selling price of $17, prime costs of $8 per unit, and a fixed cost allocation of $3 per unit. Annual depreciation on the machine is $14,000, and the tax rate of the company is 34%. What is the annual cash flow generated from the new machine? OA. $52,280 OB. $62,040 OC. $38,280 O D. $76,040
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
