third year, 2250; fourth year, 1750; fifth year, 1500 units. If the depreciation is ascribable
to use rather than the effects of time, and the units produced are of uniform quality, what
are the annual depreciation charges?
Calculation Procedure:- Determine the depreciation charge per production unit
Proportion the wearing value on the basis of annual production. Since W = $38,000 -
$800 = $37,200 and 10,000 units are produced in 5 years, the depreciation charge per pro-
duction unit = $37,200/10,000 = $3.72. - Compute the annual depreciation charge
Since the annual depreciation charge is a function of the production rate, take the product
of the depreciation charge per production unit and the annual production. Or, D 1 =
$3.72(2000) - $7440; D 2 = $9300; D 3 = $8370; D 4 = $6510; D 5 = $5580.
DECLINING-UNIT-USE METHOD
OFDEPRECIATION
Using the same data as in the previous calculation procedure, assume that depreciation
will be charged by weighting the units produced according to their relative quality. This
method reflects the quality loss resulting from increased use of the machine. The quality
weights assigned this machine are: first 4000 units produced, 2.0; next 3000 units, 1.5; re-
mainder, 1.0. Compute the depreciation charges for this machine.
Calculation Procedure:- Compute the number of depreciation units
The depreciation units are related to the annual production by applying the assigned qual-
ity rates. Thus
Year Depreciation units
1 2,000 x 2 = 4,000
2 [2,000 x 2 = 4,000
1 50Ox 1.5= 750
3 2,25Ox 1.5= 3,375
4 f 25Ox 1.5= 375
11,500 x 1 = 1,500
5 1,50Ox 1 = 1,500
Total 15,500- Proportion the wearing value
Consider the number of depreciation units as the criterion. Or, depreciation charge per de-
preciation unit = $37,200/15,500 = $2.40.