Match the following terms with the best definition. Each definition is used exactly once.

Capitalized Costs

A$.$ Direct Material Cost plus Direct Labor Cost

$(15$ points$)$

II$.$

Capitalized Costs

$2.$ Conversion Costs

B$.$ Direct Labor Cost plus Overhead Costs

$3.$ Cost Allocation

C$.$ All manufacturing costs

Cost Driver

D$.$ Any factor that affects costs

Cost Object

E$.$ Anything for which a separate measurement of cost is desired

Cost Tracing

F$.$ Cost that is first recorded as an asset and then later as an expense

Direct Costs

G$.$ Cost that changes between two decisions

Fixed Costs

H$.$ Cost that is expensed in the current fiscal period

Indirect Costs

I. Cost that is related to the object, but cannot be traced

Period Costs economically to it

Prime Costs

J$.$ Cost that is related to the object, and can be traced

Product Costs economically to it

Relevant Costs

K$.$ Historical cost

Sunk Costs

L$.$ Cost which changes with changes in the level of cost driver

Variable Costs

M$.$ Cost which does not change with changes in the cost driver

N$.$ Assigning a direct cost to a cost object

O$.$ Assigning an indirect cost to a cost object

III. We plan to spend $$120,000$ on a new machine which will last for $3$ years. The new machine will generate an extra $$65,000$ of cash revenues each year while increasing cash costs by $$20,000$ each year. We hope to sell it for $$6,000$ cash after using it for $3$ years. Use straight$-$line depreciation. Our marginal tax rate is $T=40\%.$ Calculate the annual net cash flows for periods $t=0,1,2,3$ and put the final answers in the table. Show your work.

$(10$ points$)$