Marshall Company purchases a machine for $840,000. The machine has an estimated residual value of $40,000. The company expects the machine to produce four million units. The machine is used to make 680,000 units during the current period. If the units-of-production method is used, the depreciation expense for this period is:

Question

Silly Gilly

Business

6 September, 14:57

Marshall Company purchases a machine for $840,000. The machine has an estimated residual value of $40,000. The company expects the machine to produce four million units. The machine is used to make 680,000 units during the current period. If the units-of-production method is used, the depreciation expense for this period is:

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Roderick Rangel · Answer 1

If the units-of-production method is used, the depreciation expense for this period is: $136,000

Explanation:

Given:

Cost of machine = $840,000

Estimated residual value = $40,000

No of units produced during current period = 680,000 units

Expected production by the machine = 4 million units

Unit of production method = cost of asset-salvage value/useful life in the form of units produced

Depreciation per unit = (cost - residual value) / estimated life in units

= (840,000-40,000) / 4,000,000

Depreciation per unit = 0.2 per unit

To calculate depreciation for period,

Depreciation for period = depreciation per unit*actual units produced in this period

=.2*680,000

Depreciation for period = $136,000