Marshall Company purchases a machine for $840,000. The machine has an estimated residual value of $40,000. The company expects the machine to produce four million units. The machine is used to make 680,000 units during the current period. If the units-of-production method is used, the depreciation expense for this period is:

If the units-of-production method is used, the depreciation expense for this period is: $136,000

Explanation:

Given:

Cost of machine= $840,000

Estimated residual value= $40,000

No of units produced during current period= 680,000 units

Expected production by the machine= 4 million units

Unit of production method= cost of asset-salvage value/useful life in the form of units produced

Depreciation per unit= (cost - residual value)/estimated life in units

                                     = (840,000-40,000)/4,000,000

Depreciation per unit= 0.2 per unit

To calculate depreciation for period,

Depreciation for period= depreciation per unit*actual units produced in this period

                                         = .2*680,000

Depreciation for period= $136,000

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