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Units of Production Depreciation

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When an asset's useful life is depreciated based on physical wear or units of service, an asset may be depreciated using the units of production method. Depreciation expense would be calculated by: ((acquisition cost - residual value)/ total capacity in units)* total units consumed in a certain year.


Suppose a company's truck is expected to work for 200,000 km. The acquisition cost of the truck is 40,000 and its residual value is 5,000. If on year 1 the truck traveled 30,000 km its accumulated depreciation for year 1 would be of $5,250.

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