A machine cost $40,000,has a salvage value
of $8,000,and is expected to have a useful life of 100,000 hours.if it is utilized for a total of 8,000 hours in year one,what is the depreciation expense based
on the unit-of-production-method at the end of the year.
To calculate the depreciation expense based on the unit-of-production method, you need to determine the depreciation rate per hour and then multiply that rate by the number of hours the machine was utilized during the year.
First, let's calculate the depreciation rate per hour:
Depreciation Rate = (Cost - Salvage value) / Useful life
Cost = $40,000
Salvage value = $8,000
Useful life = 100,000 hours
Depreciation Rate = ($40,000 - $8,000) / 100,000 = $32,000 / 100,000 = $0.32 per hour
Now, multiply the depreciation rate per hour by the number of hours the machine was utilized during the year to calculate the depreciation expense:
Depreciation Expense = Depreciation Rate x Hours utilized
Hours utilized during year one = 8,000 hours
Depreciation Expense = $0.32 per hour x 8,000 hours = $2,560
Therefore, the depreciation expense based on the unit-of-production method at the end of the year would be $2,560.