Mott Company Uses the Units-Of-Activity Method in Computing Depreciation

question 231

Multiple Choice

Mott Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $48000 that will produce an estimated 100000 units over its useful life. Estimated salvage value at the end of its useful life is $4000. What is the depreciation cost per unit?

• A) $4.40
• B) $4.80
• C) $.44
• D) $.48

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Definitions:

Marginal Cost

The extra charge resulting from the production of one more unit of a product or service.

Sushi Restaurant

A dining establishment that specializes in the preparation and serving of sushi, a traditional Japanese dish featuring vinegared rice combined with various ingredients, including seafood and vegetables.

Opportunity Cost

The cost of the next best alternative that must be foregone as a result of making a particular decision.

Limited Resources

A term that describes the finite availability of resources such as time, money, and raw materials, which are necessary for the production of goods and services.