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

$ 0.61 per unit

Step-by-step 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