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This company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2012, and was used 27,000 hours in 2012 and 26,000 hours in 2013. Refer to Fabian Woodworks. If the company uses the units-of-production method, what is the depreciation rate per hour for the equipment

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Answer:

The correct answer is $0.10 per hour

Explanation:

According to the scenario, the calculation of the depreciation rate per hour using the units-of-production method is as follows

= (Purchase cost - estimated residual value) ÷ (estimated hours of operation)

= ($12,000 - $2,000) ÷ (100,000 hours)

= ($10,000) ÷ (100,000 hours)

= $0.10

hence, the depreciation rate per hour for the equipment is $0.10

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