The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000.The company expects the machine to produce two million units.It makes 400,000 units during the current period.If the units-of-production method is used,the amortization rate is:
A)$0.95 per unit.
B)$0.19 per unit.
C)$0.05 per unit.
D)$1.00 per unit.

Question

Quizplus · Accepted Answer

To calculate the amortization rate per unit using the units-of-production method, we need to subtract the residual value from the cost of the machine and then divide by the estimated number of units it can produce over its useful life:

Amortization rate per unit = (Cost of machine - Residual value) / Estimated number of units
Amortization rate per unit = ($400,000 - $20,000) / 2,000,000
Amortization rate per unit = $380,000 / 2,000,000
Amortization rate per unit = $0.19

Therefore, the answer is B, $0.19 per unit.

The Widget Tool and Die Company Buys a $400,000 Stamping