XL: Calculating Depreciation with the Production Method

ID: Q108271

The information in this article applies to:

Microsoft Excel 98 Macintosh Edition
Microsoft Excel 97 for Windows
Microsoft Excel for Windows 95, versions 7.0, 7.0a
Microsoft Excel for Windows, versions 5.0, 5.0c
Microsoft Excel for the Macintosh, versions 5.0, 5.0a

SUMMARY

Microsoft Excel includes functions to calculate straight line, sum of the years digits, and double-declining balance depreciation (SLN, SYD, DDB). A fourth depreciation method, the production method, is widely used in business to calculate depreciation on items that can produce discrete units. Items such as vehicles and machinery are most often depreciated in this manner. This article contains a custom function that calculates depreciation using this method.

MORE INFORMATION

Microsoft provides programming examples for illustration only, without warranty either expressed or implied, including, but not limited to, the implied warranties of merchantability and/or fitness for a particular purpose. This article assumes that you are familiar with the programming language being demonstrated and the tools used to create and debug procedures. Microsoft support professionals can help explain the functionality of a particular procedure, but they will not modify these examples to provide added functionality or construct procedures to meet your specific needs. If you have limited programming experience, you may want to contact the Microsoft fee-based consulting line at (800) 936-5200. For more information about the support options available from Microsoft, please see the following page on the World Wide Web:

   http://www.microsoft.com/support/supportnet/refguide/

Example

Suppose you purchase a truck for $25,000, and it has a residual value of $1500. The useful life of the truck is 250,000 miles. During a specific period of operation, you drive the truck 15,000 miles. The function below will calculate the depreciation for that period.

1. Create a new workbook in Microsoft Excel. Insert a module sheet, and

   type the following code:

      ' Defines the function and the variables.
      Function Prod_depr(usage as Double, cost as Double, _
         residual_value as Double, useful_life As Double) As Double

         ' Performs the mathematical computation.
         Prod_depr = usage * ((cost - residual_value) / useful_life)

      End Function

2. In cell A1 of Sheet1, type the following formula:

      =Prod_depr(15000,25000,1500,250000)

   The function will return a value of 1410.

NOTE: The arguments for the function were based on the following descriptions:

"Usage" is the amount of usage, in units, the item has received during the depreciation period. This can be measured in miles or hours used.
"Cost" is the original price paid for the item.
"Residual_value" is the estimated salvage or trade-in value.
"Useful_ life" is the planned usage, in units, of the item during its lifetime.

NOTE: It may be easier to type the formula

   = usage * ((cost - residual_value) / useful_life

directly into your worksheet if you do not intend to use the custom macro function frequently.

Additional query words: 5.00 7.00 8.00 XL98 XL97 XL7 XL5 Production Depreciation

Keywords          : kbprg kbdta kbdtacode PgmOthr KbVBA 
Version           : WINDOWS:5.0,7.0,97; MACINTOSH:5.0,98
Platform          : MACINTOSH WINDOWS
Issue type        : kbhowto

Last Reviewed: May 17, 1999