5.3 - Maximum Profit Method Overview
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Practice Questions
Test your understanding with targeted questions
What is the formula to calculate annual profit?
💡 Hint: Think about what subtracting costs from revenue represents.
Define Cumulative Profit.
💡 Hint: Consider how profits from multiple years add up.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does the Maximum Profit Method focus on?
💡 Hint: Think about what the method's name implies regarding profits.
True or False: The economic life of machinery is defined as the period of maximum cumulative profit.
💡 Hint: Consider whether the definition aligns with how we’ve discussed economic life.
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Challenge Problems
Push your limits with advanced challenges
A machine generates the following annual profits over six years: 10 lakh, 12 lakh, 15 lakh, 14 lakh, 8 lakh, and 5 lakh. Calculate the average annual cumulative profit over these years.
💡 Hint: Remember to divide total cumulative profits by the total number of years.
If the current machine has a decreasing estimated profit from 20 lakh to 18 lakh in the second year while the proposed new machine shows a steady profit of 22 lakh, should the current machine be replaced?
💡 Hint: Compare current estimated profits against those of the proposed machine.
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