In the unit produced method, how does the depreciation rate change each year?

In the unit produced method, how does the depreciation rate change each year?

• A. It remains constant
• B. It is based on the total cost of the asset
• C. It changes based on quantity produced each year
• D. It declines steadily

Answer: (C)

In the unit produced method of depreciation, the depreciation expense is directly related to the actual usage of the asset, which is measured in terms of the number of units produced or the hours used. This means that the depreciation expense can fluctuate each year depending on how much the asset was utilized. As production levels rise and fall year to year, the total depreciation will change correspondingly. If an asset is used more in one year, the depreciation expense will increase proportionately to the production levels. Conversely, if the asset is less utilized in a different year, the depreciation will decrease accordingly. This method allows for a more accurate reflection of an asset's wear and tear based on its actual output rather than a fixed schedule. Thus, it is this variability in production that leads to changes in the depreciation rate annually.

In the unit produced method of depreciation, the depreciation expense is directly related to the actual usage of the asset, which is measured in terms of the number of units produced or the hours used. This means that the depreciation expense can fluctuate each year depending on how much the asset was utilized.

As production levels rise and fall year to year, the total depreciation will change correspondingly. If an asset is used more in one year, the depreciation expense will increase proportionately to the production levels. Conversely, if the asset is less utilized in a different year, the depreciation will decrease accordingly. This method allows for a more accurate reflection of an asset's wear and tear based on its actual output rather than a fixed schedule. Thus, it is this variability in production that leads to changes in the depreciation rate annually.