Activity Method Depreciation Calculator

Calculate depreciation based on the level of activity for each period (e.g., machine cycles, miles driven, hours used)

Activity Depreciation
Time Depreciation
$
The original value of your asset or the depreciable cost
Please enter a valid asset cost
$
The value of the asset at the end of its useful life
Please enter a valid salvage value
The expected number of units that the asset will produce or last for its life (miles, widgets, hours, etc.)
Please enter a valid number of useful units
The number of units used in the period of time you want to calculate depreciation
Please enter a valid number of units used
$
The original value of your asset or the depreciable cost
Please enter a valid asset cost
$
The value of the asset at the end of its useful life
Please enter a valid salvage value
The expected number of time units that the asset will last for its life (hours, days, etc.)
Please enter a valid number of useful time units
The number of time units used in the period you want to calculate depreciation
Please enter a valid number of time units used

Calculation Formula

Depreciable Base = Asset Cost – Salvage Value
Depreciation per Unit = Depreciable Base / Useful Units
Depreciation for Period = Units Used × Depreciation per Unit

Example

You purchase a car for your business for $22,000 and expect it to have a life of 60,000 miles with a final salvage value of $2,000. If you drive 17,000 miles in a period:

Depreciable Base = $22,000 – $2,000 = $20,000
Depreciation per Mile = $20,000 / 60,000 Miles = $0.333/Mile
Depreciation for Period = 17,000 Miles × $0.333/Mile = $5,661.00

Depreciation Results

Depreciable Base: $0.00
Depreciation per Unit: $0.00
Depreciation for Period: $0.00
Remaining Value: $0.00
Remaining Units: 0
This will update the labels in the results section

Activity Method Depreciation Calculator

The Activity Method Depreciation Calculator helps you calculate depreciation based on the actual level of use rather than time. This approach is especially useful for assets whose wear and tear depend on how much they are used, such as machinery cycles, car mileage, or equipment operating hours.

Unlike time-based methods like straight-line or declining balance depreciation, the activity method links the asset’s expense directly to its productivity. You can explore all depreciation types on the Depreciation Calculators Index page.

What Is Activity Method Depreciation?

The activity method depreciation (also known as the units of production depreciation method) calculates an asset’s loss in value according to the number of units it produces or the total hours it operates. This makes it ideal for assets such as:

  • Vehicles (measured in miles driven)
  • Machines (measured in production units or operating cycles)
  • Equipment (measured in working hours)

Depreciation increases with higher usage, giving a more accurate reflection of the asset’s real cost over time.

Formula for Activity Method Depreciation

The calculation involves two main steps:

  1. Depreciable Base = Asset Cost - Salvage Value
    • Asset Cost is the original purchase price or the amount required to prepare the asset for use.
    • Salvage Value is the estimated value of the asset at the end of its useful life.
  2. Depreciation per Unit = Depreciable Base / Useful Units
  3. Depreciation for Period = Units Used in Period × Depreciation per Unit

Example of Activity Method Depreciation

Suppose you purchase a car for your business at $22,000, and you expect it to last for 60,000 miles with a salvage value of $2,000. During the first year, you drive 17,000 miles.

Depreciable Base = 22,000 - 2,000 = 20,000
Depreciation per Mile = 20,000 / 60,000 = 0.333 per mile
Depreciation for Period = 17,000 × 0.333 = 5,661.00

So, the depreciation expense for that year is $5,661.00.

If you want to compare this with other common methods, try the Straight Line Depreciation Calculator, which spreads depreciation evenly over time.

Time-Based Depreciation (Alternative Approach)

While the activity method is based on usage, you can also calculate depreciation based on the time the asset is in use. This is helpful for equipment where operation hours are the primary measure of wear.

Formulas:
Depreciable Base = Asset Cost - Salvage Value
Depreciation per Unit Time = Depreciable Base / Useful Time Units
Depreciation for Period = Number of Time Units Used × Depreciation per Unit Time

Example of Time Depreciation

Let’s say you buy a construction vehicle for $225,000, with an expected life of 15,000 hours and a salvage value of $5,000. In one year, it operates for 1,475 hours.

Depreciable Base = 225,000 - 5,000 = 220,000
Depreciation per Hour = 220,000 / 15,000 = 14.667 per hour
Depreciation for Period = 1,475 × 14.667 = 21,633.83

This means your depreciation expense for that year is $21,633.83.

If you’d like to explore how this compares to performance-based methods, check the Units of Production Depreciation Calculator, which uses the same logic but applies specifically to output-based assets.

Why Use the Activity Method?

The activity method provides the most accurate measure of depreciation for assets whose usefulness depends on how much they are used. It prevents underestimating or overestimating depreciation when the asset’s activity level changes each period.

Benefits include:

  • Depreciation aligns with actual productivity
  • Suitable for manufacturing or transport industries
  • More accurate cost allocation per unit produced

However, it requires detailed tracking of usage data, which may not always be practical for smaller businesses.

The Activity Method Depreciation Calculator gives business owners and accountants a practical tool to estimate asset depreciation based on real usage. This method ensures expenses reflect actual wear and tear, offering a truer financial picture of asset performance.

For a full comparison of different depreciation methods, explore the Depreciation Calculators Index, where you’ll find calculators for declining balance, sum of years, and other advanced models.