Production Based
Depreciation - Units
of production method of
depreciation takes the
depreciable cost and
divides that by the
expected units the asset
will process/produce.
The production method
calculation results from
3 equations.
Depreciation per unit
produced and
depreciation for a
period..
1.Depreciable Cost =
Original Cost - Salvage
Value
2.Depreciation per Unit
= Depreciable Cost /
Total Units Expecteed to
be Produced
3.Depreciation for
Period = Depreciation
per Unit x Number of
Units Produced in a
Period
Example:
Company X purchased
widget machine for
$100,000. Expected
production is 500,000
widgets over a life of 5
years with a salvage
value at the end of 5
years of $50,000.
