Enter the cost, salvage value, and the total estimate units produced into the calculator to determine the units of production depreciation.
Units of Production Depreciation Formula
The following formula is used to calculate the units of production depreciation.
UPD = ( C – SV ) / TP
- Where UPD is the units of production depreciation
- C is the cost basis of the asset
- SV is the salvage value of the asset
- TP is the total production of the asset over the lifespan
Units of Production Depreciation Definition
Units of production depreciation is defined as the expense of an asset per unit produced.
How to calculate units of production depreciation?
- First, determine the cost basis.
This is the total cost of the asset over it’s lifetime. For this example we will say this is $100,000.00.
- Next, determine the salvage value.
Determine the total salvage value of the asset after its useful life has expired. For this example we will say the material can be salvage for $1,000.00.
- Next, determine the units of production.
This is the total units the asset is expected to produce over it’s life. We will assume this value is 80 for this example.
- Finally, calculate the UPD.
We find the UPD to be ($100,000.00 – $1,000.00) / 80 = 1237.5 $/unit.
Units of production depreciation is a measure of the expense of an asset per unit that it produces. In other words, how much cost per unit produced.