A company uses the units of production method for a machine that produces 100,000 units over its life. If the machine costs $40,000 and has a salvage value of $4,000, what is the depreciation per unit?
Practice Questions
1 question
Q1
A company uses the units of production method for a machine that produces 100,000 units over its life. If the machine costs $40,000 and has a salvage value of $4,000, what is the depreciation per unit?
$0.36
$0.40
$0.44
$0.50
Depreciation per unit = (Cost - Salvage Value) / Total Units = ($40,000 - $4,000) / 100,000 = $0.36.
Questions & Step-by-step Solutions
1 item
Q
Q: A company uses the units of production method for a machine that produces 100,000 units over its life. If the machine costs $40,000 and has a salvage value of $4,000, what is the depreciation per unit?
Solution: Depreciation per unit = (Cost - Salvage Value) / Total Units = ($40,000 - $4,000) / 100,000 = $0.36.
Steps: 5
Step 1: Identify the cost of the machine, which is $40,000.
Step 2: Identify the salvage value of the machine, which is $4,000.
Step 3: Identify the total number of units the machine will produce over its life, which is 100,000 units.
Step 4: Calculate the total depreciation by subtracting the salvage value from the cost: $40,000 - $4,000 = $36,000.
Step 5: Calculate the depreciation per unit by dividing the total depreciation by the total number of units: $36,000 / 100,000 = $0.36.
