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Use the following information for the Exercises below. [The following information applies to the questions displayed below.] Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $84,600. The machine's useful life is estimated at 20 years, or 393,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 33,300 units of product. Exercise 8-5 Units-of-production depreciation LO P1 Determine the machine’s second-year depreciation using the units-of-production method.

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Answer:

$6,600

Explanation:

Depreciation per units-of-production method:

Depreciation per unit = (cost computerized manufacturing machine - salvage value) / machine's useful units of product.

Depreciation per unit = ($84,600 - $6,000) / 393,000 units

Depreciation per unit = $78,600 / 393,000 units

Depreciation per unit = $0.2 per unit

Machine’s second-year depreciation:

Depreciation second-year = depreciation per unit * second-year units of product

Depreciation second-year = $0.2 * 33,300 units

Depreciation second-year = $6,600

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