Snowstone Company purchased an ice cream cone manufacturing machine for $20,000. The machine is estimated to have a useful life of 100,000 cones, and it is expected to have a trade-in value of $5,000. The machine's depreciation per unit is equal to:
A) $0.20 per cone.
B) $0.15 per cone.
C) $0.34 per cone.
D) $0.42 per cone.

Question

Snowstone Company purchased an ice cream cone manufacturing machine for $20,000. The machine is estimated to have a useful life of 100,000 cones, and it is expected to have a trade-in value of $5,000. The machine's depreciation per unit is equal to: ​
A) $0.20 per cone.
B) $0.15 per cone.
C) $0.34 per cone.
D) $0.42 per cone.

Quizplus · Accepted Answer

To calculate the depreciation per unit, we need to use the formula:

Depreciation per unit = (Cost of the asset - Trade-in value) / Estimated units of output

Substituting the values:

Depreciation per unit = ($20,000 - $5,000) / 100,000 = $0.15

Therefore, the depreciation per unit is $0.15 per cone. So, the best choice is B.

Snowstone Company Purchased an Ice Cream Cone Manufacturing Machine for $20,000