Final answer:
The unit method of depreciation aligns costs with usage, avoids averaging lifespans and rates of diverse assets, and can provide tax benefits through accelerated depreciation during high-usage periods.
Step-by-step explanation:
The advantages of depreciating assets by the units-of-production method rather than the composite method are numerous. One major advantage is that the units-of-production method aligns depreciation with the actual usage of the asset. In other words, depreciation expenses are incurred as the asset is used, which can lead to a more accurate matching of expenses with revenues. This method is particularly useful when the asset's wear and tear is closely correlated with the number of units it produces or the hours it operates.
Furthermore, the units-of-production method avoids the averaging of the service lives and depreciation rates of different assets that occurs under the composite method. Each asset's depreciation is based solely on its own usage, not an average, allowing for more precise tracking of individual asset costs. Lastly, the units-of-production method may result in tax benefits by accelerating depreciation when the asset usage is high in the earlier years of service, potentially reducing taxable income during those high-usage periods.