Depreciation policy is an important decision made by a company's Finance Director. A company has purchased...

 

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Depreciation policy is an important decision made by a company's Finance Director. A company has purchased some equipment for 85,000, with an estimated scrap value of 9,000 at the end of its useful life of 5 years. The equipment can operate for 3,000 hours per year, and completes the manufacture of a specific product every 20 minutes. You are required to: (a) Based on the above data, calculate the yearly depreciation charge/factor using four different techniques. (2 marks) (b)Recommend to management which one of the four methods they should adopt in a situation where the equipment is used to produce a wide range of dissimilar components for assembly into a range of office furniture, and explain why you are proposing this particular recommendation. (1 mark) Depreciation policy is an important decision made by a company's Finance Director. A company has purchased some equipment for 85,000, with an estimated scrap value of 9,000 at the end of its useful life of 5 years. The equipment can operate for 3,000 hours per year, and completes the manufacture of a specific product every 20 minutes. You are required to: (a) Based on the above data, calculate the yearly depreciation charge/factor using four different techniques. (2 marks) (b)Recommend to management which one of the four methods they should adopt in a situation where the equipment is used to produce a wide range of dissimilar components for assembly into a range of office furniture, and explain why you are proposing this particular recommendation. (1 mark)