{"id":3634,"date":"2020-10-21T16:51:23","date_gmt":"2020-10-21T16:51:23","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-financialaccounting\/?post_type=chapter&#038;p=3634"},"modified":"2020-11-24T22:00:13","modified_gmt":"2020-11-24T22:00:13","slug":"units-of-production-method","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/chapter\/units-of-production-method\/","title":{"raw":"Units-of-Production Method","rendered":"Units-of-Production Method"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Outcomes<\/h3>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Compute depreciation using units-of-production method<\/li>\r\n<\/ul>\r\n<\/div>\r\n<h2>Units-of-production (output) method<\/h2>\r\nThe units-of-production depreciation method assigns an equal amount of depreciation to each unit of product manufactured or service rendered by an asset. Since this method of depreciation is based on physical output, firms apply it in situations where usage rather than obsolescence leads to the demise of the asset. Under this method, you would compute the depreciation charge per unit of output. Then, multiply this figure by the number of units of goods or services produced during the accounting period to find the period\u2019s depreciation expense.\r\n\r\nThe units of production method requires a two-step process:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Step 1: Calculate Depreciation per Unit:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">[latex]\\text{Depreciation per unit}=\\dfrac{\\left(\\text{Cost}-\\text{Salvage}\\right)}{\\text{expected number of units over lifetime}}[\/latex]<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">Step 2: Calculate Depreciation Expense:\r\n<ul>\r\n \t<li style=\"font-weight: 400;\">[latex]\\text{Depreciation Expense}=\\text{Number of units produced this period}\\times\\text{Depreciation per unit}[\/latex]<\/li>\r\n<\/ul>\r\n<\/li>\r\n<\/ul>\r\nHere is a video example:\r\n\r\nhttps:\/\/youtu.be\/udNuu_7zje0\r\n\r\nNext, we\u2019ll learn how to journalize adjusting entries to record depreciation.\r\n<div class=\"textbox tryit\">\r\n<h3>PRACTICE QUESTION<\/h3>\r\nhttps:\/\/assessments.lumenlearning.com\/assessments\/23780\r\n\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Outcomes<\/h3>\n<ul>\n<li style=\"font-weight: 400;\">Compute depreciation using units-of-production method<\/li>\n<\/ul>\n<\/div>\n<h2>Units-of-production (output) method<\/h2>\n<p>The units-of-production depreciation method assigns an equal amount of depreciation to each unit of product manufactured or service rendered by an asset. Since this method of depreciation is based on physical output, firms apply it in situations where usage rather than obsolescence leads to the demise of the asset. Under this method, you would compute the depreciation charge per unit of output. Then, multiply this figure by the number of units of goods or services produced during the accounting period to find the period\u2019s depreciation expense.<\/p>\n<p>The units of production method requires a two-step process:<\/p>\n<ul>\n<li style=\"font-weight: 400;\">Step 1: Calculate Depreciation per Unit:\n<ul>\n<li style=\"font-weight: 400;\">[latex]\\text{Depreciation per unit}=\\dfrac{\\left(\\text{Cost}-\\text{Salvage}\\right)}{\\text{expected number of units over lifetime}}[\/latex]<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\">Step 2: Calculate Depreciation Expense:\n<ul>\n<li style=\"font-weight: 400;\">[latex]\\text{Depreciation Expense}=\\text{Number of units produced this period}\\times\\text{Depreciation per unit}[\/latex]<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>Here is a video example:<\/p>\n<p><iframe loading=\"lazy\" id=\"oembed-1\" title=\"Units of Production Depreciation\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/udNuu_7zje0?feature=oembed&#38;rel=0\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>Next, we\u2019ll learn how to journalize adjusting entries to record depreciation.<\/p>\n<div class=\"textbox tryit\">\n<h3>PRACTICE QUESTION<\/h3>\n<p>\t<iframe id=\"lumen_assessment_23780\" class=\"resizable\" src=\"https:\/\/assessments.lumenlearning.com\/assessments\/load?assessment_id=23780&#38;embed=1&#38;external_user_id=&#38;external_context_id=&#38;iframe_resize_id=lumen_assessment_23780\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:400px;\"><br \/>\n\t<\/iframe><\/p>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-3634\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Units-of-Production Method. <strong>Authored by<\/strong>: Joseph Cooke. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Accounting Principles: A Business Perspective. <strong>Authored by<\/strong>: James Don Edwards, University of Georgia &amp; Roger H. Hermanson, Georgia State University. <strong>Provided by<\/strong>: Endeavour International Corporation. <strong>Project<\/strong>: The Global Text Project. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">All rights reserved content<\/div><ul class=\"citation-list\"><li>Units of Production Depreciation Method. <strong>Authored by<\/strong>: Kristin Ingram. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/youtu.be\/udNuu_7zje0\">https:\/\/youtu.be\/udNuu_7zje0<\/a>. <strong>License<\/strong>: <em>All Rights Reserved<\/em>. <strong>License Terms<\/strong>: Standard YouTube license<\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":90270,"menu_order":10,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Units-of-Production Method\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"Accounting Principles: A Business Perspective\",\"author\":\"James Don Edwards, University of Georgia & Roger H. Hermanson, Georgia State University\",\"organization\":\"Endeavour International Corporation\",\"url\":\"\",\"project\":\"The Global Text Project\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"copyrighted_video\",\"description\":\"Units of Production Depreciation Method\",\"author\":\"Kristin Ingram\",\"organization\":\"\",\"url\":\"https:\/\/youtu.be\/udNuu_7zje0\",\"project\":\"\",\"license\":\"arr\",\"license_terms\":\"Standard YouTube license\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-3634","chapter","type-chapter","status-publish","hentry"],"part":766,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3634","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/users\/90270"}],"version-history":[{"count":6,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3634\/revisions"}],"predecessor-version":[{"id":6581,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3634\/revisions\/6581"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/parts\/766"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/3634\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/media?parent=3634"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=3634"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/contributor?post=3634"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/suny-clinton-financialaccounting\/wp-json\/wp\/v2\/license?post=3634"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}