Answer:
Annual depreciation= $35,000
Explanation:
Giving the following information:
The Doodad Company purchases a machine for $440,000.
The machine has an estimated residual value of $40,000.
The company expects the machine to produce eight million units.
The machine is used to make 700,000 units during the current period.
To calculate the depreciation expense under the units-of production method, we need to use the following formula.
Annual depreciation= [(original cost - salvage value)/useful life of production in units]*units produced
Annual depreciation= [(440,000 - 40,000)/8,000,000]*700,000
Annual depreciation= 0.05*700,000
Annual depreciation= $35,000
