Production-method-of-depreciation meaning

A depreciation method that calculates depreciation based on the usage of the asset, not the passage of time. The production method often is used to calculate depreciation for delivery vehicles by using mileage: The cost of the asset, minus its resale value, is divided by the estimated units of useful mileage to arrive at a cost per mile. The cost per mile is multiplied by the actual miles that the vehicle was driven during the year to arrive at a depreciation cost.
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