Question

Heatherbrae Co. uses the units-of-production method to estimate depreciation. The company purchased a new machine for 46,000 that will produce an estimated 310,000 units over its useful life. The estimated residual value of the machine is2,000. What is the depreciation rate per unit?

Answer 1

The depreciation rate per unit for Heatherbrae Co.'s machine is approximately $0.1419, calculated by subtracting the machine's residual value from its cost and dividing by the estimated total production units.

Step-by-step explanation:

To calculate the depreciation rate per unit for Heatherbrae Co.'s new machine using the units-of-production method, we need to subtract the estimated residual value from the cost of the machine and then divide by the estimated total production units. The formula looks like this:

Depreciation Rate per Unit = (Cost of Machine - Residual Value) / Total Estimated Production Units

Using the numbers given:

1. Cost of Machine = $46,000
2. Residual Value = $2,000
3. Total Estimated Production Units = 310,000 units

Inserting these numbers into the formula:

Depreciation Rate per Unit = ($46,000 - $2,000) / 310,000 units

Depreciation Rate per Unit = $44,000 / 310,000 units

Depreciation Rate per Unit = $0.1419 per unit

The depreciation rate per unit is approximately $0.1419.