Question

Units-of-activity is an appropriate depreciation method to use when __________.a. the company is a manufacturing company. b. the productivity of the asset varies significantly from one period to another. c. the asset's use will be constant over its useful life. d. it is impossible to determine the productivity of the asset.

Answer 1

B. the productivity of the asset varies significantly from one period to another

Step-by-step explanation:

Unit of activity method is a method or technique used in calculating depreciation. This method is used when the value of the asset been measured is more closely related to the productivity capacity than the number of years in use. In this technique of calculating depreciation of an asset, the amount of depreciation charged to an expense varies in direct proportion to the amount of asset usage.

It is calculated using the following formula

DE = [( Original value - Salvage value) / estimated production capabilities] × Units per year.

Where

DE = Depreciation expense.