(a) Fixed Per Cent of Diminishing Value Method
The chief merit of the variable percentage methods, in the eyes of
their advocates, is the way they are automatically adjusted to the
up-keep charges. The reader should study the graphs of these various
methods as a means of comparing results.
On the graph, page 158, it is shown that under the fixed per cent
of diminishing value method the periodic depreciation charges are
heavy in the beginning and decrease toward the end. It is argued
that, inasmuch as up-keep costs increase as the depreciation charge
decreases, this method automatically equalizes these two costs. This
argument was examined in detail under the previous discussion of the
straight line method. What was there set down applies equally here. The
fixed per cent method is also based on service life by periods—a time
basis rather than a service or output basis. Furthermore, it involves
a complex calculation and is perhaps never applied with any degree
of accuracy. Lawrence R. Dicksee prefers this method for handling
depreciation on machinery.
(b) Sum of Expected Life-Periods Method
The objection of complexity of calculation to the method just discussed
is overcome largely in the sum of expected life-periods method. Here
the rate of decrease is more marked, but the method has the same
general effect as the fixed per cent method. If the repair charges are
handled, as suggested, by means, of pre-estimates, the results will
not be equitable. If repairs increase with uniform regularity as the
depreciation costs decrease, fair equality is secured. Otherwise the
method has little to commend it.
(c, d) Arbitrary Methods
The two other methods under this main group, viz.: arbitrary with
increasing amounts in the one case and decreasing amounts in the other,
are not based on any orderly scheme of calculation and, having little
logic behind them, are not to be relied upon. Ease of calculation is
perhaps their only merit.