Get Creative with Depreciation: The Units of Production Method

Units of Production Method: The Most Creative Way to Depreciate

When it comes to calculating depreciation, there are numerous ways to do it. One such method is the units of production method. This approach is based on the usage of an asset in a given period. It’s quite simple; you calculate depreciation based on how much the asset was used.

For example, let’s say that you own a printing press, and you plan to use it for 100,000 pages throughout its lifespan. In its first year, your printer prints 20,000 pages and costs $50,000 in total cost (including installation). Using the units of production method here means that you would take your total cost ($50k) divided by the estimated number of pages printed over its life (100k), which gives us $0.5 per page.

From this point forward, if your printer prints another 10k pages within that same fiscal year–the amount depreciated will be calculated as follows: $0.5 x 10k = $5k.

The beauty of this method lies in its flexibility – if your printer runs out early or lasts longer than expected due to maintenance or unforeseen circumstances; this approach adjusts accordingly.

However creative this may seem – please note that not all assets can be depreciated using this method, consult with an accountant before finalizing any decisions related to depreciation calculations!