A company decided to use the units-of-production method to calculate depreciation on a car to be driven by the sales manager. The amount of annual depreciation will vary with which of the following?
A) Amount of maintenance expense incurred on the car.
B) Age of the car.
C) Balance in accumulated depreciation.
D) Number of kilometres the car is driven.

Question

Quizplus · Accepted Answer

The units-of-production method calculates depreciation based on the usage of the asset. In this case, the number of kilometres the car is driven will determine the amount of depreciation expense for the year. Therefore, choice D is the best choice. The amount of maintenance expense incurred, the age of the car, and the balance in accumulated depreciation do not directly affect the units-of-production method of depreciation.

A Company Decided to Use the Units-Of-Production Method to Calculate