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A new machine costing Rs. 1 lakh was purchased by a company to manufacture a special product. Its useful life is estimated to be 5 years and scarp value at Rs. 10,000. The production plan for the next 5 years using the above machine is as follows :

The depreciation expenditure for the 2nd year under units of production method will be 
  • a)
    Rs. 6,250
  • b)
    Rs. 12,500
  • c)
    Rs. 15,000
  • d)
    Rs. 25,000
Correct answer is option 'B'. Can you explain this answer?
Verified Answer
A new machine costing Rs. 1 lakh was purchased by a company to manufac...
The correct option is B.
Depreciation rate = Original cost – Salvage value / Total estimated output units
Depreciation Rate= (100000 - 10000) / 72000 = 1.25 
Depreciation Year 1 = 5000 x 1.25 = 6250
Depreciation Year 2 = 10000 x 1.25 = 12500
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Most Upvoted Answer
A new machine costing Rs. 1 lakh was purchased by a company to manufac...
Step:1 totalling the units produced in 5 years
Step:2 less the scrap value from cost of the machine
Step:3 Ans of step:2 is divided by the ans of step :1
Step:4 the ans of step 3 is multiplied by the second year units produced..
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A new machine costing Rs. 1 lakh was purchased by a company to manufacture a special product. Its useful life is estimated to be 5 years and scarp value at Rs. 10,000. The production plan for the next 5 years using the above machine is as follows :The depreciation expenditure for the 2nd year under units of production method will bea)Rs. 6,250b)Rs. 12,500c)Rs. 15,000d)Rs. 25,000Correct answer is option 'B'. Can you explain this answer?
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