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Dear Tutor,
In a manufacturing company, where we usually charge depreciation to cost of sales, how do we treat it if for example the factory is closed for 8 months for example and only operates for 4 months.
Or to go really extreme, what if for example we only produce one unit this year, will we still allocate the depreciation of the whole factory to that unit?Or we will use a standard cost and then show depreciation in a separate line?
Regards
There are no rules for how deprecation is charged – neither for Paper F5 (where it is not very likely to be relevant) nor for the financial accounts papers.
It is normally charged on a time basis (regardless of how many units are produced). If the factory is owned for the whole year then it will normally be charged for the whole year.
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