Question

According to the depreciation rates used by the company and described in the Production Cost Report, if a company adds 70 new workstations at a cost of $75,000 each and also spends $10 million for an addition to its assembly plant to accommodate the new workstations, then its annual depreciation costs will rise by:

a. 4% of $15,250,000 or $610,000.

b. $1,550,000.

c. $193,750.

d. $800,000.

e. $775,000

Answer 1

Its annual depreciation costs will rise by 4% of $15,250,000 or $610,000. The right answer is a

Step-by-step explanation:

In order to calculate the amount its annual depreciation costs will rise by, we would have to calculate first the total cost with the following formula:

Total cost=(Number of workstation added×cost of work station)+money spend

Total cost=(70×$75,000)+10,000,000

Total cost=$15,250,000

Therefore, Annual depreciation=4%×$15,250,000

=$610,000

Its annual depreciation costs will rise by 4% of $15,250,000 or $610,000