Question

Original cost of a machine =Rs $7,50,000$. Installation charges =Rs $1,00,000$. Salvage value $=50,000$. Find out the depreciation for 3rd year by units of production method, if units produced in 3rd year was $40,000$ and total estimated production was $2,00,000$.

• A. Rs. $1,20,000$
• B. Rs. $1,80,000$
• C. Rs. $1,60,000$
• D. Rs. $2,00,000$

Answer 1

Answer: (C)

Rs. $1,60,000$

Depreciable value of Asset = 750000 + 100000 - 50000(salvage value)

= 800000

Depreciation = Depreciable value * units produced / Total production hrs

= 800000*40000/200000

=Rs 160000