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Question

# If the original cost of a machine is Rs. 170,000, estimated scrap value Rs. 20,000, what is the depreciation if production during the first year is 6,000 and total estimated production during the working life of the machine is 60,000 units.

A
Rs. 10,000
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B
Rs. 15,000
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C
Rs. 9,500
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D
Rs. 12,000
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Solution

## The correct option is A Rs. 15,000Cost of machine = Rs. 1,70,000; Scrap value = Rs. 20,000; Depreciation in production during the first year = 6,000 units; Production units during the life of the machine = 60,000 unitsDepreciation rate per unit = (Rs. 1,70,000 - Rs. 20,000)/ 60,000 units = Rs. 2.5Depreciation of first year = 6,000 * Rs. 2.5 = Rs. 15,000

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