Depletion Expense Calculator

Formula

The formula to calculate the Depletion Expense is:

\[ \text{DE} = \text{UC} \times \text{CPU} \]

Where:

DE is the depletion expense ($).
UC is the number of units consumed.
CPU is the total cost per unit ($/unit).

The cost per unit (CPU) is derived by the following formula:

\[ \text{CPU} = \frac{\text{P} + \text{E} + \text{D}}{\text{UE}} \]

Where:

CPU is the cost per unit.
P is the cost to purchase the resource.
E is the cost to explore the resource.
D is the cost to develop the resource.
UE is the expected number of units produced from the resource.

What is Depletion Expense?

A depletion expense is a charge applied to profits in exchange for the use of natural resources. These natural resources can be anything from gas, to oil, to minerals, and more. It represents the allocation of the cost of extracting these resources over the period they are consumed.

Example Calculation

Let's consider an example:

Number of Units Consumed: 1000 units
Total Cost per Unit: $5/unit

Using the formula to calculate the Depletion Expense:

\[ \text{DE} = 1000 \times 5 = 5000 \text{ dollars} \]

This means that the depletion expense for this scenario is $5,000.