What is the units of production depreciation formula?

Depreciation = (cost − salvage) ÷ total estimated units × units produced in the period.

What counts as a unit?

Any measure of use: items produced, machine hours, miles or kilometres driven.

What if actual output exceeds the estimate?

Depreciation stops when the book value reaches salvage; the estimate should then be revised.

Is units of production allowed for tax?

It depends on the country; many tax systems require time-based methods for most assets.

Units of Production Depreciation Formula

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Units of Production Depreciation Calculator

The units of production method links depreciation to how much an asset is actually used rather than to the passage of time. First work out a rate per unit: the depreciable base, cost minus salvage, divided by the total units the asset is expected to produce over its life. Then each year’s depreciation is that rate multiplied by the units produced that year.

Formula

Depreciation per unit = Cost − SalvageTotal estimated units Depreciation_t = Units_t × rate per unit

Where

Total estimated units: total output (units, hours, miles) expected over the asset’s life
Units_t: actual output in period t

Calculator

Asset cost

Salvage value

Total estimated units

Units produced each year

Separate values with commas, spaces or new lines.

Result and step-by-step solution

Depreciation per unit

0.45

Year 1: 20,000 units × 0.45 = 9,000.00. Book value after 5 years: 5,000.00.

Rate per unit
50,000.00 − 5,000.00100,000 = 0.45

Multiply by each year’s output (capped so book value never falls below salvage)

Year	Book value at start	Depreciation	Accumulated	Book value at end
1	50,000.00	9,000.00	9,000.00	41,000.00
2	41,000.00	13,500.00	22,500.00	27,500.00
3	27,500.00	11,250.00	33,750.00	16,250.00
4	16,250.00	6,750.00	40,500.00	9,500.00
5	9,500.00	4,500.00	45,000.00	5,000.00

How to use the formula

The “units” can be anything that measures use: items manufactured, machine hours, miles driven or tonnes extracted. The method suits assets whose wear depends on use, such as delivery trucks, printing presses and mining equipment, and it gives a truer picture of cost per unit in years when output rises or falls.

A machine costing 50,000 with a 5,000 salvage value and an expected life of 100,000 units has a rate of 0.45 per unit. Producing 20,000, 30,000, 25,000, 15,000 and 10,000 units gives depreciation of 9,000, 13,500, 11,250, 6,750 and 4,500, which brings the book value to exactly 5,000. If output ever exceeds the estimate, the calculator stops depreciation at the salvage value. For time-based methods, see straight-line and double declining balance.

Frequently asked questions

What is the units of production depreciation formula?: Depreciation = (cost − salvage) ÷ total estimated units × units produced in the period.
What counts as a unit?: Any measure of use: items produced, machine hours, miles or kilometres driven.
What if actual output exceeds the estimate?: Depreciation stops when the book value reaches salvage; the estimate should then be revised.
Is units of production allowed for tax?: It depends on the country; many tax systems require time-based methods for most assets.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.