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A machine which originally cost $12,000 has an estimated life of ten years and is depreciated at the rate of $1,200 a year. it has been unused for some time, however as expected production orders did not materialise.
A special order has now been received which would require the use of the machine for two months.
The current net realisable value of the machine is $8,000. If it is used for the job, its value is expected to fall to $7,500. The net book value of the machine is $8,400.
Routine maintenance of the machine currently costs $40 a month. With use the cost of maintenance and repairs would increase to $ 60 a month.
Ignore the time value of money.
What is the relevant cost of using the machine for the order?There is no point in simply asking test questions here and expecting an answer.
Unless it is homework (and we do not provide homework answers) then you must have an answer in the same book in which you found the question. Ask whatever it is in the answer that you are not clear about and then I will help you.
I assume that you have watched my free lectures on this? The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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