Use the Units of Production Depreciation Calculator to calculate the depreciation expense based on the number of products that your machinery or equipment can output each year or during productive life(Useful units). Productive units provides a more defined measure in manufacturing whereby equipment is measured when used, rather than over a defined timescale (a financial year for example) which in turn allows calculation of equipment Return on Investment as part of the transformation model.
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If you are running a business, you are likely using assets to produce goods that you sell on a regular basis. Every asset has its useful life and they lose a part of their value for each unit of goods they produce. The concept of these assets losing their value, can be defined by a single word 'Depreciation' and the method of calculating the ratio of depreciation respective to each unit is known as units of production depreciation.
This method calculates the depreciation expense on an asset considering the actual usage of the asset, which makes it the most accurate metric for charging depreciation. Units of production depreciation allow businesses to charge more depreciation during the periods when there is more asset usage and vice-versa.
Units of production method is useful in companies where usage varies asset to asset. It is calculated for each asset separately, let's learn some more about the calculations.
Let's start with the factors that affect the units of production depreciation the most:
The units of production method is generally applied when assessing the depreciation of plants and machineries as their depreciation is closely related to the number of units they produce. You can do the calculation by following 3 steps:
After completing above steps you can calculate the units of production depreciation by using the following formula:
Calculating unit of production depreciation manually can be hectic and time consuming, fortunately an online calculator can be used as a substitute. Let's take a look at the way to use the calculator.
The units of production depreciation calculator designed by iCalculator does the complex calculations for you with just a fraction of the effort that it takes for performing calculations manually. The calculator uses the above explained formula as an algorithm, all you have to do is input the following details:
On the basis of the above mentioned inputs, the calculator will provide you with the 3 following results:
Other than saving time, the calculator will help you realize the true value that your assets have and the results can be used to compare the depreciation cost of the assets of different brands that you have used before in order to buy the assets that has the least depreciation ratio per unit.
The results can be saved for bookkeeping purposes as we as can be used to compare the depreciation cost with other firms that have the same nature of business and use similar plants or machinery. However, they should not be compared with the businesses that belong to different industries.
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