Calculate depreciation based on actual usage or production output with per-unit cost and remaining life projection.
Most depreciation methods charge a fixed amount every year, but a machine that runs 20,000 units one year and 90,000 the next wears out unevenly. This calculator ties depreciation to actual output: it divides the depreciable base (cost minus salvage value) by the total units the asset is expected to produce, then charges that fixed per-unit rate against each year's actual production. The surprise for most users is that the per-unit rate is locked in at purchase - produce twice as much one year and you book twice the depreciation, and the asset is fully depreciated once cumulative output reaches the estimate.
A concrete input and expected output from the current implementation.
Input
Cost $50,000; salvage value $5,000; estimated total production 150,000 units. Year 1 production: 20,000 units. Year 2 production: 35,000 units.
Expected output
Per-unit rate: $0.30 (depreciable base $45,000 / 150,000 units). Year 1: $6,000 depreciation; book value $44,000. Year 2: $10,500 depreciation; book value $33,500. Units remaining after year 2: 95,000; remaining life at year 2's pace: about 2.7 years (95,000 / 35,000).
Each unit produced consumes a fixed $0.30 of the $45,000 depreciable base, so the expense follows output: 20,000 units charge $6,000 and 35,000 charge $10,500. Remaining life divides the 95,000 units still unconsumed by the annual pace assumed.
The tool subtracts salvage value from cost to find the depreciable base, then divides it by the estimated total production entered. The quotient is the per-unit rate, which stays fixed for the asset's life. Each unit produced consumes one unit of that base, so cumulative depreciation can never exceed cost minus salvage value, no matter how the asset is used.
Annual depreciation is the per-unit rate times the units actually produced that year, so the expense varies with usage and drops to zero in idle periods. The tool also compares cumulative output against the estimate and divides the remaining units by an expected annual production to project remaining life in years - a projection that shifts as actual usage departs from plan.
Depreciation simply stops: cumulative expense is capped at cost minus salvage value, so output beyond the estimate is charged nothing. If that happens early in the asset's life, the estimate was probably too low - you can revise it prospectively, spreading the remaining depreciable base over a revised estimate of remaining units.
Usually not. The IRS uses MACRS, which depreciates most property on time-based schedules rather than usage. Units-of-production is primarily a book (GAAP) method for assets whose consumption genuinely tracks output. Check IRS Publication 946 to see whether an asset qualifies for a usage-based method before relying on this number for taxes.
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