![]() ![]() For example, suppose in the first-year assets produced 1000 units and 2nd year 2000 units, then production cost in 2nd year will be higher, and the amount depreciation will also be higher as compared to 1 year.More the production, the higher the depreciation. Larger depreciation in most productive years can help offset the higher costs associated with higher production levels because depreciation is directly proportional to unit production.But under the straight-line method, depreciation will charge for the full year therefore, as you can see, the unit production method is more accurate in deriving profit and loss than the straight line. Under this method, depreciation is charged based on 320 instead of the full year.For example, 1000 units were produced by the machinery in 320 days, and in the remaining days, the machinery was idle. Under this method, the business can track its profit and loss more accurately than the straight-line method Straight-line Method Straight Line Depreciation Method is one of the most popular methods of depreciation where the asset uniformly depreciates over its useful life and the cost of the asset is evenly spread over its useful and functional life.Under this method, cost, i.e., depreciation, matches with revenue, i.e., production.It is beneficial in determining the efficiency of an asset.Under this method, depreciation will be charged based on 5000 units for 340 days rather than full-year hence it provides a matching concept of revenue and cost. ![]() For example, machinery produced 5000 units in 340 days.
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