A company decided to use the units of production method to calculate depreciation on a car to be driven by the sales manager.The amount of annual depreciation will vary with which of the following?
A)Age of the car.
B)Balance in accumulated depreciation.
C)Number of kilometres the car is driven.
D)Amount of maintenance expense incurred on the car.

Question

Quizplus · Accepted Answer

The units of production method of depreciation considers the usage of the asset to calculate depreciation. In this case, the usage is measured by the number of kilometers the car is driven. Thus, option C is the correct choice. The age of the car, balance in accumulated depreciation and maintenance expenses incurred are not considered while calculating depreciation using the units of production method.

A Company Decided to Use the Units of Production Method