Units of production depreciation, explained and calculated

In short

Units of production depreciation charges in proportion to actual usage, measured by a meter such as hours run, litres pumped or units produced. Cohiva Control reads the asset's meter, computes the charge per unit with fixed-precision decimal arithmetic rounded half up, holds a residual-value floor, and posts the monthly journal to Xero, QuickBooks, NetSuite or Crunch.

Worked example: Units of Production monthly schedule

Asset cost: $42,000.00Residual value: $2,000.00Useful life: 60 months (5 years)Total expected units: 120,000Units per month: 2,000

Month	Opening book value	Depreciation	Closing book value
1	$42000.00	$666.67	$41333.33
2	$41333.33	$666.67	$40666.67
3	$40666.67	$666.67	$40000.00
4	$40000.00	$666.67	$39333.33
5	$39333.33	$666.67	$38666.67
6	$38666.67	$666.67	$38000.00
7	$38000.00	$666.67	$37333.33
8	$37333.33	$666.67	$36666.67
9	$36666.67	$666.67	$36000.00
10	$36000.00	$666.67	$35333.33
11	$35333.33	$666.67	$34666.67
12	$34666.67	$666.67	$34000.00

Figures are computed by the same depreciation engine Cohiva Control uses in the product (money as NUMERIC(19,4), rounded ROUND_HALF_UP), shown for the first 12 months of an illustrative asset.

Units of production depreciation, explained and calculated

Time-based methods assume an asset wears out on a calendar. Units of production assumes it wears out through use. It charges depreciation in proportion to what the asset actually does, measured by a meter, so a hard-working month depreciates more than an idle one. This page explains the method, walks through a worked example, and shows how Cohiva Control ties it to the same meters that drive preventive maintenance.

How units of production works

The method spreads the depreciable amount across expected usage rather than across time:

Charge per unit equals (cost minus residual value) divided by total expected units.
Period charge equals charge per unit times the units recorded this period.

The charge per unit is fixed for the asset; what varies is how many units it records each period. Over the asset’s life the total charge still sums to the depreciable amount, but the timing follows usage rather than the calendar.

A worked example

The calculator above uses a cost of 42,000, a residual value of 2,000, 120,000 total expected units and 2,000 units a month. The depreciable amount of 40,000 divided by 120,000 units gives a charge per unit of one third of a dollar. At a steady 2,000 units a month the charge is 666.67 every month, stepping book value down evenly. In a real operation the units would vary, and the charge would vary with them; the steady-usage example simply makes the arithmetic clear. These figures come from the product’s depreciation engine, so they match what Cohiva Control posts.

When to use it

Units of production fits assets whose wear is driven by use, not age: pumps, compressors, production machinery and similar plant with a meter you can trust. Because Cohiva Control already tracks meters and can schedule preventive maintenance on meter intervals, the usage figure is captured once and serves both maintenance and depreciation. If an asset wears with time regardless of use, a time-based method such as straight-line or diminishing value is a better match.

How Cohiva Control computes it

Cohiva Control reads the asset’s recorded units for the period and applies the fixed charge per unit through the same engine the product uses internally. Money is a fixed-precision decimal rounded half up, never a floating point number, and the residual-value floor ensures the asset never depreciates below residual even if recorded usage runs high.

Each monthly run writes to an append-only depreciation ledger and can post a journal to Xero, QuickBooks, NetSuite or Cohiva Crunch. The run is idempotent, posting state is tracked separately from the immutable ledger row, and the asset you depreciate is the same asset your team maintains and meters.

Part of the Cohiva platform

Cohiva Control is part of the Cohiva platform. Leisure operators often run it with Cohiva Complex, and finance teams connect it to Cohiva Crunch for the general ledger. Explore the platform at www.cohiva.app.

This page provides general information about how Cohiva Control calculates depreciation. It is not accounting, tax or financial advice. Confirm treatment with your accountant or adviser.

Frequently asked questions

What is the units of production formula?

Charge per unit equals cost minus residual value, divided by total expected units. The period charge equals charge per unit times the units recorded that period, so a busy month depreciates more than a quiet one.

When should I use it?

Use it for assets whose wear tracks usage rather than time, such as pumps, compressors and production machinery with a reliable meter. It matches depreciation to how hard the asset actually works.

Where do the units come from?

From the asset's meter in Cohiva Control. The same meters that drive meter-based preventive maintenance feed the usage figure for this method, so usage is recorded once.

What if usage is uneven month to month?

That is the point of the method. The charge rises and falls with recorded usage, so a heavy month carries more depreciation and a light month carries less.

Where do the journals go?

Each monthly run writes to an append-only depreciation ledger and can post a journal to Xero, QuickBooks, NetSuite or Cohiva Crunch, idempotently.