Questions: Bramble Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for 61000 that will produce an estimated 120000 units over its useful life. Estimated salvage value at the end of its useful life is 4600. What is the depreciation cost per unit? 0.47 5.08 0.51 4.70

Solution Steps

To determine the depreciation cost per unit using the units-of-activity method, we need to follow these steps:

1. Calculate the total depreciable cost by subtracting the salvage value from the purchase cost.
2. Divide the total depreciable cost by the estimated total units of activity to get the depreciation cost per unit.

The total depreciable cost is calculated by subtracting the salvage value from the purchase cost: \[ \text{Depreciable Cost} = \text{Purchase Cost} - \text{Salvage Value} \] Given: \[ \text{Purchase Cost} = \$61000, \quad \text{Salvage Value} = \$4600 \] \[ \text{Depreciable Cost} = 61000 - 4600 = 56400 \]

The depreciation cost per unit is calculated by dividing the total depreciable cost by the estimated total units of activity: \[ \text{Depreciation Cost per Unit} = \frac{\text{Depreciable Cost}}{\text{Estimated Units}} \] Given: \[ \text{Depreciable Cost} = 56400, \quad \text{Estimated Units} = 120000 \] \[ \text{Depreciation Cost per Unit} = \frac{56400}{120000} = 0.47 \]

Final Answer