Units Production Method of Depreciation

The video tutorial explains the units of production method for calculating depreciation. It involves two main steps: first, determining the depreciation rate per unit by dividing the depreciable base by the total expected units of production; second, applying this rate to the actual units produced each year to calculate annual depreciation expenses. The method ensures that depreciation aligns with asset usage, with the rate remaining constant throughout the asset's life.

What is the main factor that determines the depreciation expense in the units of production method?

• The number of units produced

• The initial cost of the asset

• The age of the asset

• The market value of the asset

In Step 1 of the units of production method, what is subtracted from the total acquisition cost to find the depreciable base?

• Salvage value

• Annual depreciation

• Market value

• Total units produced

How is the depreciation rate per unit calculated in the units of production method?

• By dividing the depreciable base by the total expected units

• By multiplying the total cost by the number of units

• By dividing the salvage value by the total units

• By adding the salvage value to the total units

What do you multiply the depreciation rate by in Step 2 to find the annual depreciation expense?

• The actual units produced in the year

• The salvage value

• The initial cost of the asset

• The total expected units

Once the depreciation rate is calculated in Step 1, how often should it be recalculated?

• Every time the asset is used

• Only once, then used annually

• Every month

• Every year