Which depreciation method matches wear with usage rather than time?

Which depreciation method matches wear with usage rather than time?

• A. Units of production depreciation
• B. Straight-line depreciation
• C. Double-declining balance
• D. Sum-of-the-years' digits depreciation

Answer: (A)

Depreciation that matches wear with usage ties expense to how much the asset is actually used, not just to how many years pass. The units-of-production method does this by calculating depreciation per unit of output: (cost minus salvage value) divided by estimated total units the asset will produce. Each period’s depreciation then equals that per-unit amount times the actual units produced in that period. So if the machine runs more hours or produces more units, depreciation increases; if it runs less, depreciation decreases, reflecting true wear. In contrast, straight-line spreads a fixed amount each period, regardless of usage; double-declining balance and sum-of-years'-digits allocate more depreciation earlier or based on year-based formulas, not on actual wear from usage.

Depreciation that matches wear with usage ties expense to how much the asset is actually used, not just to how many years pass. The units-of-production method does this by calculating depreciation per unit of output: (cost minus salvage value) divided by estimated total units the asset will produce. Each period’s depreciation then equals that per-unit amount times the actual units produced in that period. So if the machine runs more hours or produces more units, depreciation increases; if it runs less, depreciation decreases, reflecting true wear.

In contrast, straight-line spreads a fixed amount each period, regardless of usage; double-declining balance and sum-of-years'-digits allocate more depreciation earlier or based on year-based formulas, not on actual wear from usage.