Question

Mott Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $48,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $4,000.
What is the depreciation cost per unit?

a) $4.40 b) $4.80 c) $0.44 d) $0.48

Answer 1

Answer:

c) $0.44

Explanation:

In order to calculate per unit depreciation, we first calculate total depreciable amount.

Depreciable amount = Cost - salvage value

Depreciale amount = 48,000 - 4000 =$44,000

Depreciation per unit = 44,000/ 100,000 = $0.44/ unit

This is the amount chargeable multiplied by the activity in the appropriate period.

Hope that helps.