How do I compute the units of production method of depreciation? Example?

Expert Solution

Follow these steps to calculate depreciation under the units of production method:

Estimate the total number of hours of usage of the asset, or the total number of units to be produced by it over its useful life.
Subtract any estimated salvage value from the capitalized cost of the asset, and divide the total estimated usage or production from this net depreciable cost. This yields the depreciation cost per hour of usage or unit of production.
Multiply the number of hours of usage or units of actual production by the depreciation cost per hour or unit, which results in the total depreciation expense for the accounting period.

depreciation=		number of unit produced/ Life in number of units × (Cost − Salvage Value)

Example : A plant costing $110 million was purchased on April 1, 2010. The salvage value was estimated to be $10 million. The expected production was 150 million units. The plant was used to produce 15 million units till the year ended December 31, 2010. Calculate the depreciation on the plant for the year ended December 31, 2011.

Depreciation = (15/150) × ($110 million - $10 million) = $10 million

ekkarill92 answered 11 months ago

Explain in detail how to compute each of the following depreciation methods: straight-line, units-of-production, and double-declining-balance.

how do i compute the discount on notes receivable

The calculation for annual depreciation using the units of output method is

How do you calculate equivalent units? How do I determine the equivalent units for Magnesium and...

How do you calculate equivalent units? How do I determine the equivalent units for Magnesium and also bromobenzene specifically?

How do I compute overhead cost for direct labor?

What are equivalent units, how do we compute them, and why do we care?

Equivalent Units of Production: Average Cost Method Units of production data for the two departments of...

Equivalent Units of Production: Average Cost Method Units of production data for the two departments of Atlantic Cable and Wire Company for July of the current fiscal year are as follows: Drawing Department Winding Department Work in process, July 1 2,100 units, 65% completed 650 units, 30% completed Completed and transferred to next processing department during July 33,600 units 32,750 units Work in process, July 31 1,600 units, 70% completed 1,100 units, 20% completed Each department uses the average cost...

Different depreciation methodologies: straight line depreciation, declining balance, units of production depreciation methods; should be able...

Different depreciation methodologies: straight line depreciation, declining balance, units of production depreciation methods; should be able to compute the depreciation amount and journal entries using each of those methods.

What is the amount of units of production depreciation for an asset that cost for $250,000...

What is the amount of units of production depreciation for an asset that cost for $250,000 a salvage value of 10,000 and is estimated to produce 40,000 units and produce is 6500 units in the first year?

Depreciation by units-of-activity Method Prior to adjustment at the end of the year, the balance in...

Depreciation by units-of-activity Method Prior to adjustment at the end of the year, the balance in Trucks is $419,400 and the balance in Accumulated Depreciation—Trucks is $124,880. Details of the subsidiary ledger are as follows: Truck No. Cost Estimated Residual Value Estimated Useful Life Accumulated Depreciation at Beginning of Year Miles Operated During Year 1 $83,000 $12,450 220,000 miles — 33,000 miles 2 115,400 13,848 280,000 $23,080 28,000 3 96,000 13,440 200,000 $76,800 20,000 4 125,000 15,000 420,000 $25,000 50,400...

Question