Production unit method to compute depreciation
Briefly describe production unit method to compute depreciation?
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Production Unit Method is as well a method of computing depreciation. According to this method, rate of depreciation is predetermined at per unit that is computed on the basis of total number of units manufactured throughout the life of the asset. This method gives more significance to the usage factor. Higher the number of units manufactured, higher will be the amount of depreciation and vice versa. Formula to compute:
Rate of Depreciation per unit = (Cost of machine – Estimated Scrap Value) / Estimated number of units produced
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Rs. Sales 2,40,000 Variable costs 1,44,000 Fixed costs 26,000 Profit before tax 70,000 Rate of tax 40% Firm is proposing to buy the new plant that could generate extra annual profit of Rs. 10,000. The fixed cost of new plant is expected to Rs. 4000. New plant would increase sales volume by Rs. 40,00
Depreciated the equipment, estimated life 5 years, estimated salvage value $5000, straight line depreciation
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