An industrial machine was purchased for $500,000, and an additional $50,000 was
ID: 2441630 • Letter: A
Question
An industrial machine was purchased for $500,000, and an additional $50,000 was required for site prep and installation labor. The freight for the delivery was $10,000. The company received a trade-in allowance of $75,000 on an old machine which had a book value of 60,000. What is the cost basis of this asset for depreciation purposes? 6. a. $500,000 b. $560,000 c. $500,000 d. $485,000 e. $545,000 7. Given the sensitivity graph below, which of the following statements is most accurate? 300 250 200 150 VarA -Var B Var S0 var D -30% 0% -10% 0% +10% +20% +30% 100 % Deviation If I can only concentrate on getting the best forecasts of one variable, it should be Variable A because it has the largest negative slope If I expect up to 25% error may exist in my forecast for all of these variables. the acceptance of this project may be at risk. Making sure I have a good estimate of Variable D is extremely important in planning this project. Variable B is the sales revenue in this example. a. b. c. d.Explanation / Answer
1. e. $545000
Since, cost = $(500000+50000+10000-75000+60000)= $545000
2. (c)
Variable D has the least deviation.