Most companies compute depletion on natural resources (such as oil wells) using the units of production method.

Question

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The units of production method is the most commonly used method for computing depletion, which is the allocation of the cost of natural resources over the period of their extraction or use. This method calculates depletion by dividing the total cost of the resource by its estimated total recoverable units (such as barrels of oil) and then multiplying that unit depletion rate by the actual units extracted or used during each period.

Most Companies Compute Depletion on Natural Resources (Such as Oil