Question
Elite Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at
Elite Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $488,000 cost with an expected four-year life and a $19,200 salvage value. All sales are for cash, and all costs are out of pocket except for depreciation on the new machine. Additional information includes the following. (Use Table B.1) |
| |||
Expected annual sales of new product | $ | 1,880,00 | |
Expected annual costs of new product | |||
Direct materials | 460,000 | ||
Direct labor | 677,000 | ||
Overhead excluding straight-line depreciation on new machine | 335,000 | ||
Selling and administrative expenses | 165,000 | ||
Income taxes | 34 | % | |
Required: | |
1. | Compute straight-line depreciation for each year of this new machine |
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