Unit-Of-Production Depreciation

This method provides for depreciation by means of a fixed rate per unit of production. Under this method, one must first determine the cost per one production unit and then multiply that cost per unit with the total number of units the company produced within an accounting period to determine its depreciation expense. In units of production method, higher depreciation is charged when there is higher activity and less is charged when there is low level of operation.

Depreciation =	Number of Units Produced	× (Cost − Salvage Value)
	Life in Number of Units