A certain operation is now performed by hand, the labor cost per unit is P 54 and annual fixed charge for tool use is P 10,000. A machine that is considered for this job will cost P 240,000, and have a salvage value of P 10,000 at the end of its 6 - year life. With it labor cost is P 22 per unit and annual fixed charge is P 20,000. At what number of units per year, at zero interest, will the cost of the two methods break even?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A certain operation is now performed by hand, the labor cost per unit is P 54 and annual fixed charge for tool use is P 10,000. A machine that is considered for this
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