- Enter the Initial Cost, Salvage Value, Total Units, and Units Produced.
- Click "Calculate Depreciation" to calculate the depreciation.
- Calculation steps will be displayed below.
- Click "Clear Calculation Steps" to reset the calculation steps.
The units of production depreciation calculator is a useful financial tool for calculating depreciation expense based on asset usage or output volume. It implements the units-of-production depreciation method.
Concept
The calculator uses the formula:
Annual Depreciation Expense = (Cost – Salvage Value) x (Annual Units of Activity / Total Estimated Units of Activity)
Where:
Cost = Initial cost of the asset
Salvage Value = Estimated residual value at end of life
Annual Units of Activity = Usage or output in a year
Total Estimated Units of Activity = Expected lifetime usage
This allocates depreciation based on each year’s proportional utilization relative to the total estimated lifetime usage. Years with higher usage get larger depreciation.
Features
Key features of the calculator:
- Flexible depreciation periods
- Handles both annual and partial first year depreciation
- Estimates units of activity per year
- Scenarios for fluctuating annual usage
- Graphs depreciation expense over time
- Adjustable asset values and lifetime units
- Detailed schedules of depreciation data
Benefits
Benefits of using the units-of-production depreciation calculator:
- Matches depreciation to asset utilization
- No assumptions needed about time patterns
- Handles increased usage from growing production
- Accounts for idle or discontinued assets
- Better reflects asset value decline
- Useful for customized equipment, vehicles
Applications
The calculator has many applications:
- Production equipment like machines, tools
- Oil and gas drilling assets
- Mines, quarries, and mineral deposits
- Transportation vehicles like trucks and airplanes
- Farming assets like tractors and harvesters
- Printing presses, punching and dieing machines
Conclusion
The units-of-production depreciation calculator provides an easy way to allocate depreciation expense based on annual usage or output. It is useful for assets whose value decline depends mostly on utilization. The detailed schedules and graphs help analyze depreciation patterns over time.
References
- Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2018). Intermediate Accounting (16th ed.). Hoboken, NJ: Wiley.
- Blocher, E. J., Stout, D. E., Cokins, G., & Chen, K. H. (2018). Cost Management: A Strategic Emphasis (8th ed.). New York, NY: McGraw-Hill Education.
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