Question

Units-of-activity is an appropriate depreciation method to use when

1. the productivity of the asset varies significantly from one period to another.
2. it is impossible to determine the productivity of the asset.
3. the asset's use will be constant over its useful life. the company is a manufacturing company.

Answer 1

Answer:

1. the productivity of the asset varies significantly from one period to another.

Explanation:

The units of production depends upon the following information:

1. Purchase value of an asset

2. Residual value

3. Total Estimated production

4. Production units of each year

The formula is given below:

= (Original cost - residual value) ÷ (estimated production bolts)

Now for the particular year, it would be

= Production units × depreciation per units

Hence, the appropriate option is 1.