units-of-output depreciation

Popular Terms
Method in which depreciation is computed on the basis of an asset's actual use, instead of the time in service, to match depreciation expense with the revenue generated. It is suitable where the total number of units of output or usage over the asset's productive or useful life can be estimated with reasonable accuracy, although their annual total may vary from year to year. In this method, the number of total units produced or used in an accounting period is multiplied by a depreciation rate. This rate is computed by dividing the depreciable cost of the asset by the number of (1) units estimated to be produced (in case of a manufacturing plant or machine), or (2) hours or miles estimated to be traveled (in case of a vehicle) over the asset's estimated useful life.
Also called units-of-production depreciation, or production unit method of depreciation.

Email Print Embed