Instructions Comment on the appropriateness of the controllers comments.

Situation II: Etheridge Company manufactures electrical appliances, most of which are used in homes. Company engineers have designed a new type of blender which, through the use of a few attachments, will perform more functions than any blender currently on the market. Demand for the new blender can be projected with reasonable probability. In order to make the blenders, Etheridge needs a specialized ma- chine that is not available from outside sources. It has been decided to make such a machine in Etheridges own plant. Instructions

(a) Discuss the effect of projected demand in units for the new blenders (which may be steady, decreas- ing, or increasing) on the determination of a depreciation method for the machine.

(b) What other matters should be considered in determining the depreciation method? (Ignore income tax considerations)