A factory has a machine costing $76,000. It has a 5-year life and an estimated capacity of 150,000 parts. The salvage value of the machine is 20% of its cost. If 35,000 parts are machined in the first year of operation, what is the depreciation expense?

Question

Quizplus · Accepted Answer

The depreciation expense is calculated using the units-of-production method. First, calculate the depreciable base: $76,000 cost - ($76,000 * 20% salvage value) = $60,800. Then, calculate the depreciation per unit: $60,800 / 150,000 parts = $0.40533 per part. For 35,000 parts, the depreciation expense is 35,000 * $0.40533 ≈ $14,187 rounded.

A Factory Has a Machine Costing $76,000