Meranda Corporation purchases a machine for $125,000. It has an estimated salvage value of $10,000 an is expected to produce 50,000 units in its lifetime. During the first year of operation, it produced 14,500 units. To the nearest dollar, the depreciation for the first year under the units of production method will be?
Here, the formula for depreciation per unit=(cost-salvage)/expected life.
Thus depreciation per unit=(125000-10000)/50000=$2.3 per unit.
Depreciation for year 1= 14500*2.3=$33350.
I hope it makes sense.
To calculate the depreciation for the first year under the units of production method, we need to know the following information:
1. Cost of the machine: $125,000
2. Salvage value: $10,000
3. Total expected units produced: 50,000
4. Units produced in the first year: 14,500
First, we need to calculate the depreciable cost, which is the cost of the machine minus the salvage value:
Depreciable cost = Cost of the machine - Salvage value
Depreciable cost = $125,000 - $10,000
Depreciable cost = $115,000
Next, we need to calculate the depreciation per unit, which is the depreciable cost divided by the total expected units produced:
Depreciation per unit = Depreciable cost / Total expected units produced
Depreciation per unit = $115,000 / 50,000
Depreciation per unit = $2.30 (rounded to two decimal places)
Finally, we can calculate the depreciation for the first year by multiplying the depreciation per unit by the units produced in the first year:
Depreciation for the first year = Depreciation per unit * Units produced in the first year
Depreciation for the first year = $2.30 * 14,500
Depreciation for the first year = $33,350 (rounded to the nearest dollar)
Therefore, the depreciation for the first year under the units of production method is approximately $33,350.