Trucks, forklifts, aircraft and machine tools wear out with use. A truck that covers 60,000 miles in a year has given up more of its useful life than one that covered 20,000, and the activity method records depreciation accordingly. This calculator works out the cost per mile, hour or cycle, applies it to each period’s usage — including idle periods with no charge — and can also project a schedule when you expect usage to be steady.
How to use the activity method calculator
- Enter the asset cost and salvage value.
- Choose what the activity is measured in: machine hours, miles, kilometers, cycles or flight hours.
- Enter the total lifetime activity you expect.
- Choose the period — years, quarters or months.
- Either enter each period’s activity (one per line) or choose same every period and enter a typical amount to project the full schedule.
Activity method formulas
The charge stops once book value reaches salvage value.
Worked example: a delivery truck by the mile
A courier buys a truck for $68,000, expects to sell it for $8,000, and plans to retire it at 250,000 miles.
- Rate: ($68,000 − $8,000) ÷ 250,000 = $0.24 per mile ($240 per 1,000 miles)
| Year | Miles | Depreciation | Ending book value |
|---|---|---|---|
| 1 | 42,000 | $10,080 | $57,920 |
| 2 | 55,000 | $13,200 | $44,720 |
| 3 | 61,000 | $14,640 | $30,080 |
| 4 | 48,000 | $11,520 | $18,560 |
| 5 | 44,000 | $10,560 | $8,000 |
Had you assumed a steady 50,000 miles a year, the projection would show $12,000 a year for five years — the same total, but without the busy year 3.
Worked example: a machine by the hour, monthly
A shop’s CNC machine costs $90,000, has a $10,000 salvage value and is rated for 20,000 hours, so it depreciates $4.00 per hour. Monthly usage of 420, 380, 0 and 510 hours gives depreciation of $1,680, $1,520, $0 during the idle month, and $2,040. Straight-line over a five-year life would have charged about $1,333 every month regardless.
Choosing the activity measure
| Asset | Common measure |
|---|---|
| Trucks, cars, buses | Miles or kilometers |
| Production machinery | Machine hours |
| Aircraft and engines | Flight hours or cycles |
| Presses, compressors | Cycles or operations |
Pick the measure that best drives wear and that you already track — odometer readings, hour meters and maintenance logs make the method easy to audit.
Strengths and limits
Usage-based depreciation matches cost to the periods that benefit, gives a true cost per mile or hour for pricing jobs, and keeps book value high for lightly used assets. Its weakness is the estimate of total activity, which can be hard to predict, and it ignores obsolescence that happens with time. For output-based measures such as items produced, see the units-of-production calculator; for time-based schedules, the depreciation calculator. To add fuel to your cost per mile, try the gas mileage calculator.
Schedules are estimates for planning and bookkeeping, not accounting or tax advice.
Frequently asked questions
What is the activity method of depreciation?
It allocates an asset's depreciable cost according to how much it is used, measured by an input such as miles driven, machine hours or operating cycles. Depreciation per unit of activity = (cost − salvage) ÷ total expected activity.
How is it different from units of production?
They share the same formula. Units of production measures output (items made), while the activity method usually measures input or usage (hours run, miles driven). Many textbooks treat them as two names for the same usage-based approach.
What happens in a period when the asset is idle?
No depreciation is recorded for that period, because there was no activity. That is a key difference from time-based methods, which charge the same amount whether or not the asset was used.
Can I calculate monthly depreciation by hours?
Yes. Choose Months as the period and enter each month's hours. A $90,000 machine with $10,000 salvage and a 20,000-hour life depreciates $4.00 per hour, so a 420-hour month costs $1,680.
Is the IRS standard mileage rate the same thing?
No. The standard mileage rate is an optional way to deduct the total cost of operating a vehicle for business, and the IRS treats part of it as depreciation. The activity method here is a bookkeeping method based on your own vehicle's cost and expected miles.