Book Value Units Of Production

The company estimates that the cab will be driven 100 000 miles over its life.

Book value units of production. Note that the book value of the asset can never dip below the salvage value even if the calculated expense that year is large enough to put it below this value. Nbv is calculated using the asset s original cost how much it cost to acquire the asset with the depreciation depletion or amortization. Depreciation expense number of units produced life in number of units x cost salvage value.

Unit of production depreciation definition. Units of production method. The formula for the units of production method.

The cab has an expected salvage value of 6 000. Depreciation per unit gross 725 225 255 626 units 0 3626 unit rounded to 4 decimal places depreciation for period 0 3626 unit x 255 626 units 92 689 99. Of the asset being subtracted from the asset s original cost.

It uses the units of production method to determine depreciation expense. Units of production depreciation is a depreciation method that allows businesses to determine the value of an asset based upon usage. What would be the book value of the taxi at the end of 2007.

This method of charging depreciation on the asset is based on the units produced during the year. This method is applied where the value of the asset is more closely related to the number of units it produces. To arrive at the book value simply subtract the depreciation to date from the cost.

Common in manufacturing it s calculated by dividing the equipment s net cost by its expected lifetime production. In the example above the asset s book value after 6 years would be 10 000 6000 or 4000. Multiplying this rate by the asset s output for the year gives you the depreciation expense.