Question

The Doodad Company purchases a machine for $400,000. The machine has an estimated residual value of $20,000. The company expects the machine to produce two million units. The machine is used to make 400,000 units during the current period. Use the information above to answer the following question. If the units-of-production method is used, the depreciation expense for this period is: A. $80,000. B. $400,000. C. $380,000. D. $76,000.

Answer 1

Answer: $76,000

Explanation:

Depreciation per unit = (Cost - Residual value) / Number of units expected to be produced

= (400,000 - 20,000) / 2,000,000

= $0.19 per unit

40,000 units were used this period so the depreciation is:

= 400,000 * 0.19

= $76,000