A factory has a machine costing $76 000. It has a 5- year life and an estimated capacity of 160 000 parts. The residual value of the machine is zero. Assume 35 000 parts are machined in the first year of operation. Using the units- of- production method, what is the depreciation expense in Year 1?

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Quizplus · Accepted Answer

Depreciation expense = (Cost - Residual value) x (Units produced in year / Estimated capacity)= (76000 - 0) x (35000 / 160000)= 76000 x 0.21875= $16,625

A Factory Has a Machine Costing $76 000