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4 cards from this section. Quick, good the night before a test.
What are the two main components of equipment costs?
Think about costs incurred irrespective of usage.
What does the initial cost of equipment include?
Look for additional costs, not just the price tag.
What are ownership costs?
Think about the costs that are always present, compared to costs that depend on usage.
True or False: Depreciation is a measure of profit.
Consider what depreciation represents in financial terms.
A crane has an initial cost of $150,000, a salvage value of $30,000, and a useful life of 10 years. Calculate the annual depreciation using the straight-line method and describe its implications for project bidding.
What costs should during project bidding?
For a backhoe costing $75,000 with a salvage value of $15,000 over 6 years, calculate the depreciation using both the double declining balance method and the sum-of-the-years-digits method. Discuss which method might be preferred in tax planning.
Think of how each method affects cash flow in the business.
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