Question

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $47,500. The machine's useful life is estimated at 10 years, or 405,000 units of product, with a $7,000 salvage value. During its second year, the machine produces 34,500 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 Denominator: Choose Numerator: Annual Depreciation Expense Depreciation expense per unit Year Annual Production (units) Depreciation Experise

Answer 1

The machine's second year depreciation using the units of production method is calculated as follows:

Depreciation Expenses Per Unit = (Cost - Salvage Value) / Total Productions

                                               = ($47,500 - $7,000) / 405,000 units

                                               = $0.10 Per Unit

Depreciation Expenses Per Unit = $0.10 Per Unit

Depreciation Expenses = 34,500 unit of production * $0.10 Per Unit

                                   = $3,450

The machine's second year depreciation using the units of production method is $3,450.