Mott Company uses the units-of-activity method in computing depreciation.A new plant asset is purchased for $48,000 that will produce an estimated 100,000 units over its useful
Life.The estimated salvage value at the end of its useful life is $4,000.What is the depreciation cost per unit?

Question

Quizplus · Accepted Answer

To calculate depreciation cost per unit using the units-of-activity method, we need to use the following formula:

Depreciation cost per unit = (Asset cost - Estimated salvage value) / Estimated total units of activity

Plugging in the values given in the problem:

Depreciation cost per unit = ($48,000 - $4,000) / 100,000 units
= $44,000 / 100,000 units
= $.44 per unit.

Therefore, the correct answer is C) $.44.

Mott Company Uses the Units-Of-Activity Method in Computing Depreciation