Question

Ramirez Company installs a computerized manufacturing machine in its factory at the beginning of the year at a cost of $84,200. The machine's useful life is estimated at 20 years, or 391,000 units of product, with a $6,000 salvage value. During its second year, the machine produces 33,100 units of product.

Answer 1

To calculate the depreciation expense for the second year, determine the depreciation per unit and multiply it by the units of product produced. Depreciation expense for the second year is $6,620

Step-by-step explanation:

The Ramirez Company installed a computerized manufacturing machine with a cost of $84,200, a useful life of 20 years or 391,000 units of product, and a $6,000 salvage value. In the second year, the machine produced 33,100 units of product. To calculate the depreciation expense for the second year, we need to determine the depreciation per unit. Subtraction the salvage value from the initial cost and divide it by the estimated units of product:

Depreciation per unit = (Initial cost - Salvage value) / Estimated units of product

Depreciation per unit = ($84,200 - $6,000) / 391,000

Depreciation per unit = $78,200 / 391,000 = $0.20

Finally, multiply the depreciation per unit by the units of product produced in the second year:

Depreciation expense for the second year = Depreciation per unit x Units of product produced

Depreciation expense for the second year = $0.20 x 33,100 = $6,620

Answer 2

The question deals with calculating the depreciation expense of a manufacturing machine using the units of production method, where the second-year depreciation expense is calculated to be $6,700.

Step-by-step explanation:

The student has posed a question relating to the depreciation calculation of a computerized manufacturing machine. To calculate the depreciation cost for the second year using the units of production method, we will apply the following formula:

Depreciation Expense = (Cost - Salvage Value) × (Units Produced / Total Estimated Units)

In this case, the cost of the machine is $84,200, the salvage value is $6,000, the total estimated units is 391,000, and the units produced in the second year are 33,100. Plugging these values into the depreciation formula:

Depreciation Expense = ($84,200 - $6,000) × (33,100 / 391,000)

By solving this, we find that the depreciation expense for the machine in its second year is $6,700.