Some equipment wears out based on how hard it’s run, not how many years have passed — units-of-production depreciation ties the expense directly to actual output instead of the calendar.
How it works
Dividing the depreciable cost (cost minus salvage value) by total estimated production units gives a per-unit depreciation rate; multiplying that rate by the actual units produced in a given year gives that year’s expense.
What this does not include
This does not include a reassessment of total estimated units over the asset’s life — if actual total production ends up meaningfully different from the original estimate, the per-unit rate (and remaining depreciation schedule) would need to be revised going forward.
How to use this calculator
- Enter cost, salvage value, total estimated units, and units produced this year.
Frequently asked questions
What kinds of assets commonly use this method?
Manufacturing equipment, vehicles depreciated by mileage, and natural resource extraction assets are common examples where usage — not time — best reflects an asset’s actual value consumption.
Can depreciation expense be zero in a given year under this method?
Yes — if an asset produces nothing in a particular year (idle equipment, for example), units-of-production depreciation charges zero expense for that year, unlike a time-based method that would still charge something.
Is this method allowed for tax purposes?
It’s a recognized method for financial reporting; tax depreciation in the U.S. generally follows MACRS instead, though units-of-production can apply in certain specific tax contexts like natural resource depletion.
