Depletion Cost Per Unit Calculator

Formula

The formula to calculate the Depletion Cost Per Unit (DCPU) is:

\[ DCPU = \frac{TC - RV}{TU} \]

Where:

$ DCPU $ is the depletion cost per unit (dollars per unit)
$ TC $ is the total cost of the resource (dollars)
$ RV $ is the residual value of the resource after it is fully depleted (dollars)
$ TU $ is the total number of units of the resource

Definitions

Depletion Cost Per Unit (DCPU): An accounting term used to allocate the cost of natural resources over the period they are consumed. It is a measure of the cost associated with the extraction of minerals, oil, natural gas, or other non-renewable resources from the earth. This cost reflects the usage of the resource and helps in accurately reporting the expense and value of the resource on financial statements.
Total Cost of the Resource (TC): The total cost incurred to acquire and develop the resource.
Residual Value of the Resource (RV): The estimated value of the resource after it is fully depleted.
Total Number of Units of the Resource (TU): The total quantity of the resource available for extraction.

Example

Let's say the total cost of the resource is $1,000,000, the residual value is $100,000, and the total number of units is 500,000. Using the formula:

\[ DCPU = \frac{1,000,000 - 100,000}{500,000} \]

We get:

\[ DCPU = 1.80 \text{ dollars per unit} \]

So, the depletion cost per unit is $1.80 per unit.

Depletion per Unit Formula

Formula: $ \text{Depletion per Unit} = \frac{\text{Cost} - \text{Residual Value}}{\text{Total Estimated Units}} $

$ \text{Depletion per Unit} $: Depletion cost per unit
$ \text{Cost} $: Initial cost of the resource
$ \text{Residual Value} $: Residual value of the resource
$ \text{Total Estimated Units} $: Total estimated units of the resource

Example: $ \text{Depletion per Unit} = \frac{100000 - 10000}{50000} $

How to Calculate Depletion Expense

Formula: $ \text{Depletion Expense} = \text{Depletion per Unit} \times \text{Units Extracted} $

$ \text{Depletion Expense} $: Total depletion expense
$ \text{Depletion per Unit} $: Depletion cost per unit
$ \text{Units Extracted} $: Number of units extracted

Example: $ \text{Depletion Expense} = 1.8 \times 1000 $

How to Calculate Depletion Rate

Formula: $ \text{Depletion Rate} = \frac{\text{Depletion Expense}}{\text{Total Estimated Units}} $

$ \text{Depletion Rate} $: Rate of depletion
$ \text{Depletion Expense} $: Total depletion expense
$ \text{Total Estimated Units} $: Total estimated units of the resource

Example: $ \text{Depletion Rate} = \frac{1800}{50000} $

Cost Depletion vs Percentage Depletion

Definition: Cost depletion and percentage depletion are two methods of calculating depletion expense. Cost depletion is based on the actual cost of the resource, while percentage depletion is based on a fixed percentage of gross income from the resource.

How to Calculate Percentage Depletion

Formula: $ \text{Percentage Depletion} = \text{Gross Income} \times \text{Depletion Rate} $

$ \text{Percentage Depletion} $: Depletion expense based on percentage
$ \text{Gross Income} $: Gross income from the resource
$ \text{Depletion Rate} $: Fixed depletion rate

Example: $ \text{Percentage Depletion} = 50000 \times 0.15 $