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Production Unit Method

Under this method, depreciation is calculated by comparing the annual production with the estimated total production
 

This method is applicable to machines producing products of uniform specifications.

Method of Calculation of Depreciation


Illustration 10

 

A machine is purchased for ₹ 2,00,000. Its estimated useful life is 10 years with a residual value of ₹ 20,000. The machine is expected to produce 1.5 lakh units during its life time. Expected distribution pattern of production is as follows:
 

Year

Productions

1 – 3

20,000 units per year

4 - 7

15,000 units per year

8 - 10

10,000 units per year


Required:
 Determine the amount of depreciation for each year using Production Units Method.
 

Solution:

 

Statement showing Depreciation under Production Units Method
 

Year

Annual Depreciation

1 to 3

Description: 29060.png

4 to 7

Description: 29068.png

8 to10

Description: 29076.png





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