Case Situation 1:
The controller's point would be valid if the depreciation method in use during the period of inactivity is the activity method. By this method, depreciation is based on the output produced or input measure. Since during the strike period the equipment was idle, there would then be no output of the equipment or no input to measure at the time and hence nothing to depreciate. However, if any of the other depreciation methods, which are based on functions of time rather of use, are being employed, then the company needs to depreciate the equipment during the strike period.
Case Situation 2:
A) Depreciation determination is based on past experience or experience with similar asset. Since the demand for the blenders is a projection and may fluctuate, the best method to use is the activity method.
B) Factors to be considered by the company in determining the depreciation method are the manner of use: whether fixed or variable. If the use of the blenders would be intermittent , then the activity method would be preferred. If the use of the asset would be a function of time, then the straight-line method would be preferred.
Case Situation 3:
The forth mill should be depreciated along with the rest of the mills in accordance with the method employed up to 2006, despite the under utilization.
The method of depreciation method that makes the most sense would be the activity method. Sharapova Company should try to estimate the life of the machine by the amount of blenders the machine can produce over its lifetime. Depreciation cost can be determined every year by taking the amount of blenders produced that year and divide by the total estimated amount of blenders the machine will produce during its estimate.