I work as an auditor and although this is probably something I wouldn't implement I have been trying to figure it out and would appreciate any help.
When analyzing Fixed Assets I was trying to determine, more or less, where the population was in terms of their useful lives. I wanted to do this to help set an expectation of what Repairs and Maint. expenses should do since the thinking is that as assets age they will require more repairs and vice versa. My first though was to simply calculate each item's remaining life as a percentage and then simply average those percentages but that doesn't seem right. Shouldn't I have some kind of weighting as the repairs for various assets would vary based on the cost of said asset (you wouldn't spend $1000 to fix a $500 computer but $1000 on a $100,000 building you would). I also tried to plot a distribution of the percentages and see if it the distribution was skewed left or right to get an indication of where the bulk of the data lay by comparing where the mean and median were in relation to each other but that still doesn't seem to fix the idea of weighting.
I am looking more for help on the theory and approach than the actual math, at least at this time, as I would very much like to try to figure this out on my own, I just need some help. I have always been fascinated by math but just not smart enough by half to get a degree in it so I am just hoping to learn some things. Below I have posted some sample data for reference.
Thanks for reading.
When analyzing Fixed Assets I was trying to determine, more or less, where the population was in terms of their useful lives. I wanted to do this to help set an expectation of what Repairs and Maint. expenses should do since the thinking is that as assets age they will require more repairs and vice versa. My first though was to simply calculate each item's remaining life as a percentage and then simply average those percentages but that doesn't seem right. Shouldn't I have some kind of weighting as the repairs for various assets would vary based on the cost of said asset (you wouldn't spend $1000 to fix a $500 computer but $1000 on a $100,000 building you would). I also tried to plot a distribution of the percentages and see if it the distribution was skewed left or right to get an indication of where the bulk of the data lay by comparing where the mean and median were in relation to each other but that still doesn't seem to fix the idea of weighting.
I am looking more for help on the theory and approach than the actual math, at least at this time, as I would very much like to try to figure this out on my own, I just need some help. I have always been fascinated by math but just not smart enough by half to get a degree in it so I am just hoping to learn some things. Below I have posted some sample data for reference.
Thanks for reading.
Asset Type | Useful Life | Yrs in Service | Original Cost | Amt Depreciated | Remaining Base | Pct of Life used |
Building | 20 | 3 | 100,000 | 15,000 | 85,000 | 15% |
Building | 25 | 31 | 180,000 | 151,200 | 28,800 | 84% |
Computer | 5 | 4 | 1,000 | 800 | 200 | 80% |
Computer | 5 | 1 | 1,000 | 200 | 800 | 20% |
Truck | 7 | 6 | 20,000 | 17,143 | 2,857 | 86% |
Truck | 7 | 2 | 18,000 | 5,143 | 12,857 | 29% |
Car | 7 | 2 | 25,000 | 7,143 | 17,857 | 29% |
Assembly Eq | 15 | 8 | 65,000 | 34,667 | 30,333 | 53% |