Question

Yello Bus Lines uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1, 2020, at a cost of $148,000. Over its 4-year useful life, the bus is expected to be driven 100,000 miles. Salvage value is expected to be $8,000. Collapse question part (a) Compute the depreciable cost per unit. (Round answer to 2 decimal places, e.g. 0.50.) Depreciation cost per unit

Answer 1

$1.40 per mile

Step-by-step explanation:

a. The computation of the depreciable cost per unit is shown below:

Depreciable Cost per unit = (Cost of Asset – Salvage Value) ÷ (Estimated Total Miles driven)

= ($148,000 - $8,000) ÷ (100,000 Miles)

= $140,000 ÷ 100,000 Miles

= $1.40 per mile

We simply applied the above formula to determine the depreciable cost per unit