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The units-of-activity method is generally not suitable forGroup of answer choicesairplanes.buildingsdelivery equipment.factory machinery

Question

The units-of-activity method is generally not suitable for

Group of answer choices

  • airplanes.
  • buildings
  • delivery equipment
  • factory machinery
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Solution

The units-of-activity method is generally not suitable for buildings.

Here's why:

  1. The units-of-activity method, also known as the activity method or the units of production method, is a depreciation method that allocates the cost of an asset over its useful life based on its usage.

  2. This method is most suitable for assets whose value is more closely tied to the amount of work they perform rather than the amount of time they exist. For example, factory machinery, delivery equipment, and airplanes are all assets that are used intensively and their wear and tear is more related to their usage rather than time.

  3. On the other hand, buildings depreciate more with time rather than usage. A building's value generally decreases over time due to factors like physical deterioration and obsolescence. Therefore, a time-based depreciation method like the straight-line method would be more suitable for buildings.

  4. Therefore, the units-of-activity method is generally not suitable for buildings.

This problem has been solved

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