The Units of Production Method of Depreciation is a systematic approach to allocate the cost of an asset based on its usage, output, or activity level. Unlike time-based methods, it ties depreciation expense directly to the asset’s operational output, making it suitable for machinery or equipment where wear and tear correlate with usage. Depreciation per unit is calculated by dividing the asset’s cost minus residual value by its total expected output, then multiplying by the units produced in each period. This method provides a more accurate reflection of an asset’s consumption and operational efficiency, aligning expenses with revenue generation.