Question

Use the following information for the Exercises below. [The following information applies to the questions displayed below] Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $43,500. The machine's useful life is estimated at 10 years, or 385,000 units of product, with a $5,000 salvage value. During its second year, the machine produces 32,500 units of product. Exercise 8-5 Units-of-production depreciation LO P1 Determine the machine's second-year depreciation using the units-of-production method. Units-of-production Depreciation Choose Numerator: Choose Denominator: Annual Depreciation Expense Depreciation expense per unit Year Annual Production (units) Depreciation Expense N

Answer 1

	CALCULATION OF THE DEPRECIATION AS PER UNIT OF PRODUCTION METHOD
	Purchase Cost of Equipment =		$                                             43,500
	Less: Salvage Value =		$                                               5,000
	Net Value for Depreciation =		$                                             38,500
	Expected to Produce Units=		$                                         3,85,000	Units
	Depreciation per unit =		$                                                 0.10	Per Unit Cost
	($ 38,500 / 385,000 Units)
	SOLUTION 1:		Choose Numerator	/	Choose Denominator	=	Annual Depreciation Expenses
			Net value of Depreciation	/	Expected productoin in life	=	Depreciation expenses per unit
			$                                             38,500	/	385000	=	$                                          0.10
	SOLUTION 2:
	CALCULATION OF THE DEPRECIATION
	Year	Annual Production	Depreciation expenses
	Years 2	32,500	$                                               3,250
			(32,500 Units X $ 0.10)