Question

Oriole Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $52000 that will produce an estimated 80000 units over its useful life. Estimated salvage value at the end of its useful life is $3200. What is the depreciation cost per unit?

Answer 1

Answer:

$ 0.61 per unit

Explanation:

The unit-of-activity method is one of the asset depreciation methods. Under this method, the depreciable cost of the asset is spread over the units produced. The formula is a more accurate measure of wear and tear.

In this case:

Depreciable cost=(purchase price -salvage value)

   =$52000.00 -$3200.00

   =$48,800.00

Depreciation  per unit=  Depricable cost / expected production

      =$48,800/80000

    =$ 0.61per unit