Firms in the extractive industries apply the units-of-production concept to record depletion expense on natural resource properties.

Question

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The units-of-production method is commonly used in extractive industries such as mining, oil, and gas to allocate the cost of natural resources over their productive lives based on the quantity of material extracted. This method accurately reflects the depletion expense of natural resource properties as it ties the expense to the actual physical extraction of resources.

Firms in the Extractive Industries Apply the Units-Of-Production Concept to Record