Question

Cesario Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 and is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 14,500 units. To the nearest dollar, the depreciation for the first year under the units of production method will be:____________.

Answer 1

Answer:

$33,350

Explanation:

The computation of the depreciation expense under the units of production method is shown below:

= (Original cost - residual value) ÷ (estimated production units)

= ($125,000 - $10,000) ÷ (50,000 units)

= ($115,000) ÷ (50,000 units)

= $2.3 per unit

Now for the first year, it would be

= Production units in first year × depreciation per unit

= 14,500 units × $2.3 per unit

= $33,350