Vango, Inc. depreciates its truck using units-of-production based on miles. Vango drove its truck 50,000 miles in year 1 and 70,000 miles in year 2. Depreciation expense will be in year 1 compared to year 2.

depreciation expense will be 40% less in year 1 compared to year 2

Explanation:

activity based depreciation is the depreciation of an machine used for production in relation to the amount of work done by the machine with a given time. The more the work done the more the deprecation rate of the machine.

In year 1  Vango truck covered = 50,000 miles

In year 2 Vango truck covered = 70,000 miles

calculate the ratio of work done in year 2 in relation to year 1 = 70000/50000

= 1.40

this shows that Vango truck did 40% more in year 2

Hence depreciation expense will be 40% less in year 1 compared to year 2

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