When computing depreciation using the units-of-production method:
A) a variable amount of depreciation is assigned to each unit of output.
B) the per-unit depreciation expense is multiplied by the number of units produced during the period.
C) the depreciation expense depends directly on time.
D) residual value is ignored.

Question

Quizplus · Accepted Answer

The units-of-production method of depreciation assigns a variable amount of depreciation to each unit of output. It is based on the assumption that the wear and tear on the asset is proportional to the amount of output it produces. Therefore, the per-unit depreciation expense is multiplied by the number of units produced during the period to calculate the total depreciation expense. The depreciation expense does not depend directly on time, and residual value is taken into account when calculating the depreciation expense. Therefore, option B is the correct answer.

When Computing Depreciation Using the Units-Of-Production Method