Question 8 A. John purchased a second-hand car for 3,500. He estimates that at the end of its useful life of 4 years he can sell the car for 500. His bookkeeper advises him to depreciate it on the reducing balance basis at the rate of 40% per annum. Choose the annual depreciation charged the third year to statement of profit or loss for the car from the following options: a) 750 b) 1,400 c) 840 d) 504 B. John has purchased a machine for 10,000. He will depreciate it either at 20% on the straight-line basis or at 30% on the reducing-balance basis. Which method will lead to the highest combined profits in the first two years that the machine is owned? a) The straight-line basis will lead to the highest combined profits. b) The reducing-balance basis will lead to the highest combined profits. c) The choice of depreciation method does not affect the combined profit figures. d) Both the straight-line basis at 20% per annum and the reducing-balance basis at 30% per annum will lead to the same combined profit figure for the first two years. Question 9 The margin of safety is a) the level of activity at which neither a profit nor a loss is made. b) the difference between the selling price of a product and the variable costs incurred in producing that product. c) measuring to an extent to which output can fall before a profitable operation turns loss-making. d) None of the above Question 10 Which of the following is not defining Just-in-time (JIT) production? a) Goods are only manufactured when ordered, raw materials and components are purchased only when they are required for a particular order. b) Stock pricing problems do not arise, and stock control becomes less of an issue since stock levels are kept to a minimum. c) Stock control, materials pricing and stock valuation will become relatively insignificant tasks. d) The manufactured goods are often kept in stock and this will increase the cost of storage for these stocks