A $26,000 company car is expected to be driven for 120,000 miles and then salvaged for $3,500. Find the unit depreciation using the units-of-production method
To find the unit depreciation using the units-of-production method, you need to divide the total depreciable cost of the car by the total expected miles to be driven.
The total depreciable cost of the car is the original cost minus the salvage value. In this case, the original cost is $26,000, and the salvage value is $3,500. Therefore, the total depreciable cost is $26,000 - $3,500 = $22,500.
The total expected miles to be driven is given as 120,000 miles.
Now, divide the total depreciable cost by the total expected miles:
Unit Depreciation = Total Depreciable Cost / Total Expected Miles
Unit Depreciation = $22,500 / 120,000
Performing the calculation, we get:
Unit Depreciation = $0.1875 per mile
So, the unit depreciation using the units-of-production method for this company car is $0.1875 per mile.