Question

klein company uses the units-of-activity method in computing depreciation. a new machine is purchased for $ 85,760 that will produce an estimated 370,300 units over its 17-year useful life. estimated salvage value at the end of its useful life is $2,137. if 8,833units were produced this year, what is the depreciation depreciation expense rounding to the nearest one dollar?

Answer 1

The depreciation expense for Klein Company's new machine for the current year, after calculating the per-unit depreciation and considering the units produced this year, is $1,996.

Step-by-step explanation:

To calculate the depreciation expense for the year using the units-of-activity method for Klein Company's new machine, we first determine the depreciation cost per unit. This is accomplished by subtracting the estimated salvage value from the cost of the machine and dividing the result by the estimated total units the machine will produce over its lifetime. The formula looks like this: Depreciation expense per unit = (Cost - Salvage Value) / Total Estimated Units.

Using the provided figures:

• Cost of Machine = $85,760
• Salvage Value = $2,137
• Estimated Total Units = 370,300
• Units Produced This Year = 8,833

The depreciation expense per unit is ($85,760 - $2,137) / 370,300 units = $0.226 per unit.

The total depreciation expense for the year is 8,833 units * $0.226 per unit, which equals $1,996.258. Rounding to the nearest one dollar, the depreciation expense is $1,996.