Capital costs are monies expended for business assets such as laboratory instruments. When equipment is purchased, its' cost is usually described as depreciation. Depreciation is the loss of value of an object due to wear and tear, the passage of time, obsolescence, technological change, and inadequacy. Figure 1 explains the straight-line depreciation method.
Figure 1
Calculating depreciation of Capital Costs
Example Calculation of Depreciation Cost
Total instrument cost = $100,000
Instrument useful life = 5 years
Total number of reportable tests per year 10,000
Annual depreciation cost = $20,000
Depreciation cost per test = $2.00
