🏭 Units of Production Depreciation
Usage-Based Depreciation for Equipment & Machinery
What is Units of Production Depreciation?
Units of Production (UOP) depreciation is a usage-based or activity-based depreciation method that allocates an asset’s cost based on its actual use, output, or production rather than the passage of time. This method is ideal for equipment and machinery whose wear and tear is more closely related to how much they are used rather than how old they are.
Key Difference from Time-Based Methods
Time-Based Methods (Straight-line, Declining Balance, Sum of Years Digits, etc.): Depreciate assets based on years passing
Units of Production: Depreciates assets based on actual usage, output, or activity
A delivery truck that sits unused for a year experiences minimal depreciation with UOP, but significant depreciation with time-based methods. Conversely, a truck driven 100,000 miles in one year would have high UOP depreciation.
The Units of Production Formula
Where:
• Cost = Original purchase price of the asset
• Salvage Value = Estimated residual value at end of useful life
• Total Estimated Units = Expected lifetime production (miles, hours, units, etc.)
• Units Produced This Period = Actual production during the accounting period
💻 Interactive UOP Calculator
Calculate depreciation based on actual usage. Enter your asset details and production numbers below.
Depreciation Results
Depreciation per Unit: $0.00 per unit
Total Period Depreciation:
Remaining Book Value: $0.00
Accumulated Depreciation: $0.00
📊 Excel Implementation Guide
Sample Excel Table Structure
This table shows the depreciation for the first 3 years of depreciation for a Truck that cost $100,000 and has a Salvage Value of $10,000.| Period | Units Produced | Depreciation per Unit | Period Depreciation | Accumulated Dep. | Book Value |
|---|---|---|---|---|---|
| Year 1 | 45,000 | $0.18 | $8,100 | $8,100 | $91,900 |
| Year 2 | 52,000 | $0.18 | $9,360 | $17,460 | $82,540 |
| Year 3 | 48,500 | $0.18 | $8,730 | $26,190 | $73,810 |
🎓 Test Your Knowledge
📚 Explore Other Depreciation Methods
Compare time-based depreciation methods such as Straight-line, decling-balance, sum of years digits,etc.!