What is the main advantage of the Units of Production Method?
Practice Questions
1 question
Q1
What is the main advantage of the Units of Production Method?
Simplicity
Accuracy in matching expenses to revenues
Lower initial depreciation
Higher tax benefits
The main advantage of the Units of Production Method is its accuracy in matching expenses to revenues based on actual usage.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the main advantage of the Units of Production Method?
Solution: The main advantage of the Units of Production Method is its accuracy in matching expenses to revenues based on actual usage.
Steps: 4
Step 1: Understand that the Units of Production Method is a way to calculate depreciation based on how much an asset is used.
Step 2: Recognize that this method looks at the actual output or usage of the asset, rather than just time.
Step 3: Realize that by matching expenses (depreciation) to the actual revenue generated from the asset, it provides a more accurate financial picture.
Step 4: Conclude that the main advantage is this accuracy in reflecting the true cost of using the asset over time.
