Answer to Question #294702 in Economics of Enterprise for Ash

Question

The Saudi Arabian Oil Refinery developed an oil at an initial cost of $ 50,000,000. What is the depletion charge during the year where it produces half million barrels of oil? Use unit or factor method in computing depletion.

Answer 1

The calculation of depletion expense is to multiply the number of consumed units of the natural resources by the cost per unit. So, to calculate the depletion cost we need also the cost per barrel of oil.