The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000. The company expects the machine to produce two million units. It makes 400,000 units during the current period. If the units-of-production method is used, the depreciation rate is:
A) $0.95 per unit.
B) $0.19 per unit.
C) $0.05 per unit.
D) $1.00 per unit.

Question

Quizplus · Accepted Answer

The depreciation rate per unit is calculated by subtracting the residual value from the cost and then dividing by the total expected production: ($400,000 - $20,000) / 2,000,000 units = $0.19 per unit.

The Widget Tool and Die Company Buys a $400,000 Stamping