A company decides to buy a new machine costing S560,000 that estimates 5 - year life . The machine can produce 250,000 units of product during its life ; specifically , 90,000 for year 1 ; 50,000 for year 2 ; year 3 is forecasted booming in consuming these products , hence increase the production that can reach to 150,000 units but the manager think that it is better to estimate an appropriate number of 70,000 ; year 4 is 20,000 and the remaining units will be produced in year 5. Salvage value is $ 60,000 . Calculate depreciation for each year following the Units of Production method .

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.