# Units of Production Depreciation Calculator

The units of production depreciation method can be used to calculate the depreciation expense for property, plant and equipment based on the level of units produced. The method is particularly useful in a manufacturing environment where a production asset reduces in value in proportion to the amount it is used.

The calculation is carried out using the units of production depreciation formula which takes the cost of the asset less any expected salvage (residual) value, and divides this by the expected lifetime production capacity of the asset in units of production. The formula used in the units of production depreciation calculator is given as follows:

Units of production depreciation = (Cost – Salvage value) / Expected lifetime units

Full details of how the method is used can be found in our units of production depreciation tutorial. ## Using the Units of Production Depreciation Calculator

The Excel units of production depreciation calculator, available for download below, is used to compute units of production depreciation by entering details relating to the asset and unit production levels. The calculator is used as follows:

1. Enter the cost of the asset. The cost of the asset can be found in the long term asset account, asset register, or on the original source document (invoice) for the asset
2. Enter the salvage value. The salvage or residual value is the amount the asset is expected to be worth at the end of its useful life. The units of production depreciation calculator works out the cost which is subject to depreciation, known as the depreciable cost.
3. Enter the lifetime units of production. The lifetime units of production is the number of units which the asset is expected to produce during its lifetime with the business. The units of production depreciation calculator works out the depreciation per production unit for the asset.
4. Enter the period units of production. The period units of production is the number of units actually produced by the asset during the accounting period. The units of production depreciation calculator works out the depreciation expense for the asset for the accounting period.