Answer first
What this calculator tells you
Calculate depreciation from how much an asset is used, rather than how many years have passed. Match depreciation to miles driven, hours run or items produced. Formula: Depreciation per unit = (cost − salvage) ÷ total expected units; yearly depreciation = units used × depreciation per unit. At the worked-example inputs, the depreciation this period is $9,000. Holding every other input steady, moving purchase cost from $64,000 to $96,000 moves the result from $7,000 to $11,000.
Transparent method
The formula
Match depreciation to miles driven, hours run or items produced.
Worked example
Example inputs
How to interpret the result
Some assets wear out by use, not by the calendar. Under the units-of-production method, the depreciable amount is divided by the total units the asset should produce, and each period takes its share. A $80,000 machine with $8,000 salvage and 240,000 units of life costs 30 cents a unit, so a year with 30,000 units takes $9,000. A quiet year takes very little.
At the worked-example inputs the depreciation this period is $9,000. It rises with purchase cost and units used this period and falls as total units over the asset's life and salvage value increase.
These are planning metrics, not audited accounting or a valuation opinion.
Before you rely on it
What to check
Base the total units on the manufacturer's rated life or your own history. An unrealistic total makes every period's charge too high or too low.
The common error
Where people go wrong with units of production depreciation calculator
Counting units beyond the asset's rated total. Depreciation stops when the total is used up, and the page caps the units to that limit.
Sensitivity evidence
How purchase cost changes the depreciation this period
Holding every other input at the worked-example value, moving purchase cost from $64,000 to $96,000 moves the depreciation this period from $7,000 to $11,000: a spread of $4,000, or 44% of the worked-example result.
| Purchase cost | Depreciation this period | Depreciation per unit |
|---|---|---|
| $64,000 | $7,000 | $0.23 |
| $72,000 | $8,000 | $0.27 |
| $80,000worked example | $9,000 | $0.30 |
| $88,000 | $10,000 | $0.33 |
| $96,000 | $11,000 | $0.37 |
Every input, tested
Which input moves the depreciation this period most
Of the 4 inputs, purchase cost moves the depreciation this period most ($2,000 across the range tested) and salvage value moves it least ($200).
| Input | Tested from | To | Depreciation this period at each end | Swing |
|---|---|---|---|---|
| Purchase cost | $72,000 | $88,000 | $8,000 to $10,000 | $2,000 (22%) |
| Total units over the asset's life | 216,000 | 264,000 | $10,000 to $8,182 | $1,818 (20%) |
| Units used this period | 27,000 | 33,000 | $8,100 to $9,900 | $1,800 (20%) |
| Salvage value | $7,200 | $8,800 | $9,100 to $8,900 | $200 (2.2%) |
Two variables at once
Depreciation this period by purchase cost and salvage value
Across the grid the depreciation this period runs from $6,800 to $11,200. Moving purchase cost from $64,000 to $96,000 shifts it by $4,000 at the middle column, and moving salvage value from $6,400 to $9,600 shifts it by $400 at the middle row, so purchase cost is the bigger lever here.
| Purchase cost \ Salvage value | $6,400 | $8,000 | $9,600 |
|---|---|---|---|
| $64,000 | $7,200 | $7,000 | $6,800 |
| $72,000 | $8,200 | $8,000 | $7,800 |
| $80,000 | $9,200 | $9,000 | $8,800 |
| $88,000 | $10,200 | $10,000 | $9,800 |
| $96,000 | $11,200 | $11,000 | $10,800 |
The highlighted cell is the worked example: $9,000.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Purchase cost | $80,000 | Enter the purchase cost used in this calculation. |
| Salvage value | $8,000 | Enter the salvage value used in this calculation. |
| Total units over the asset's life | 240,000 | Miles, machine hours or items produced. |
| Units used this period | 30,000 | Enter the units used this period used in this calculation. |
| Depreciation this period | $9,000 | |
| Depreciation per unit | $0.30 | |
Inputs, definitions and assumptions
Purchase cost
Enter the purchase cost used in this calculation. The prefilled worked-example value is $80,000.
Salvage value
Enter the salvage value used in this calculation. The prefilled worked-example value is $8,000.
Total units over the asset's life
Miles, machine hours or items produced. The prefilled worked-example value is 240,000.
Units used this period
Enter the units used this period used in this calculation. The prefilled worked-example value is 30,000.
How to use this calculator
- 1Verify the inputs. Gather purchase cost, salvage value, total units over the asset's life and units used this period from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the depreciation this period at $9,000. Store your own version of it as Scenario A.
- 3Test one change. Start with purchase cost, the input with the biggest effect here: moving purchase cost from $72,000 to $88,000 takes the depreciation this period from $8,000 to $10,000, a swing of 22% of the worked-example figure.
- 4Check the extremes. At half the example purchase cost ($40,000) the depreciation this period is $4,000; at double ($160,000) it is $19,000.
People also ask
Frequently asked questions
How do you calculate units of production depreciation?
Depreciation per unit = (cost − salvage) ÷ total expected units; yearly depreciation = units used × depreciation per unit. Enter purchase cost in dollars and salvage value in dollars. At the worked-example inputs the depreciation this period is $9,000.
What does the units of production depreciation result mean?
Match depreciation to miles driven, hours run or items produced. At the worked-example inputs the depreciation this period is $9,000. It rises with purchase cost and units used this period and falls as total units over the asset's life and salvage value increase.
How much does purchase cost change the depreciation this period?
Holding every other input at the worked-example value, moving purchase cost from $64,000 to $96,000 moves the depreciation this period from $7,000 to $11,000, a spread of $4,000.
What are the limits of this units of production depreciation calculator?
These are planning metrics, not audited accounting or a valuation opinion. The tables on this page test purchase cost only from $64,000 to $96,000; a value outside that range is not tabulated here.
Which input moves the depreciation this period most in the units of production depreciation calculator?
Ranked by how far each moves the depreciation this period across the range tested: purchase cost ($2,000, 22%), total units over the asset's life ($1,818, 20%), units used this period ($1,800, 20%) and salvage value ($200, 2.2%).
If I double purchase cost in the units of production depreciation calculator, does the depreciation this period double?
Doubling it from $80,000 to $160,000 takes the depreciation this period from $9,000 to $19,000, which is 2.11 times the worked-example figure. So the result grows faster than the input does. Halving it to $40,000 gives $4,000.
How much does salvage value matter in the units of production depreciation calculator?
The worked example uses $8,000. With the other inputs left at the worked example, moving salvage value from $7,200 to $8,800 takes the depreciation this period from $9,100 to $8,900, a swing of 2.2% of the worked-example figure.
How much does total units over the asset's life matter in the units of production depreciation calculator?
The worked example uses 240,000. With the other inputs left at the worked example, moving total units over the asset's life from 216,000 to 264,000 takes the depreciation this period from $10,000 to $8,182, a swing of 20% of the worked-example figure.
How much does units used this period matter in the units of production depreciation calculator?
The worked example uses 30,000. With the other inputs left at the worked example, moving units used this period from 27,000 to 33,000 takes the depreciation this period from $8,100 to $9,900, a swing of 20% of the worked-example figure.
Which inputs change the depreciation per unit in the units of production depreciation calculator?
At the worked-example inputs it is $0.30. Purchase cost takes it from $0.27 to $0.33, salvage value takes it from $0.30 to $0.30 and total units over the asset's life takes it from $0.33 to $0.27.
How do I calculate gross margin?
Subtract the cost of goods sold from revenue and divide by revenue. A business with $1,200,000 of revenue and $700,000 of cost of goods sold has a gross margin of about 41.7 percent.
Sources and evidence
Free Calculators Online is independent and is not affiliated with or endorsed by the source organizations. Educational estimates only.