Calculators > Financial > Depreciation > Activity Method

Activity Method Depreciation Calculator
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Activity Depreciation

Activity depreciation is based on level of activity for each period such as cycles of a machine, miles driven on a car or the amount of time a piece of equipment is used.  This calculation is equivalent to our units of production depreciation calculator.

Formulas

The activity method calculation results from 2 equations.  Depreciation per unit and depreciation for a period.

  1. Depreciation per Unit = (Original Cost - Salvage Value) / Useful Units
  2. Depreciation for Period = Number of Units Used in a Period x Depreciation per Unit

Example

You purchase a car for your business for $22,000 and you expect it to have a life of 60,000 miles with a final salvage value of $2,000.

  1. Depreciation per Mile = ($22,000 - $2,000) / 60,000 Miles = $0.333/ Mile
  2. Depreciation for Period = 17,000 Miles x $0.333/ Mile = $5661.00

Time Depreciation

Formulas

Similar to the activity depreciation, the time depreciation calculation results from 2 equations.  Depreciation per unit time and depreciation for a period based on total time the asset was used in that period.

  1. Depreciation per Unit Time = (Original Cost - Salvage Value) / Useful Time Units
  2. Depreciation for Period = Number of Time Units Used in a Period x Depreciation per Unit Time

Example

You purchase a construction vehicle for your business for $225,000 and you expect it to have a life of 15,000 hours with a salvage value of $5,000 after about 10 years.  In 1 specific period you used the vehicle for 1,475 hours.

  1. Depreciation per Hour Used = ($225,000 - $5,000) / 15,000 Hours = $14.667/ Hour (rounded to 3 decimal places)
  2. Depreciation for Period = 1,475 Hours x $14.667/ Hour = $21,633.83