You can configure Server Hardware cost driver and resource utilization parameters to calculate the accurate cost and improve the efficiency of your environment.

Cost Drivers analyzes the resources and the performance of your virtual environment. Based on the values you define, Cost Drivers can identify reclamation opportunities and can provide recommendations to reduce wastage of resources and cost.

## Configuring Depreciation Preferences

To compute the amortized cost of the Server Hardware cost driver, you can configure the depreciation method and the depreciation period. Cost Drivers supports two yearly depreciation methods and you can set the depreciation period from two to seven years.
Note: Cost Drivers calculates the yearly depreciation values and then divides the value by 12 to arrive at the monthly depreciation.
Method Calculation
Straight line `Yearly straight line depreciation = [(original cost - accumulated depreciation) / number of remaining depreciation years]`
Max of Double or Straight `Yearly max of Double or Straight = Maximum (yearly depreciation of double declining balance method, yearly depreciation of straight line method) `

`Yearly depreciation of double declining method= [(original cost - accumulated depreciation) * depreciation rate].`

`Depreciation rate = 2 / number of depreciation years. `
Note: `Double declining depreciation for the last year = original cost - accumulated depreciation`

## Example for Straight Line Depreciation Method

Year Original Cost Accumulated Depreciation Straight Line Depreciation Cost
Year 1 10000 0
`[(10000-0)/5] =	2000`
Year 2 10000 2000
`[(10000-2000)/4] = 2000`
Year 3 10000 4000
`[(10000-2000)/3] = 2000`
Year 4 10000 6000
`[(10000-2000)/2] = 2000`
Year 5 10000 8000
`[(10000-2000)/1] = 2000`

## Example for Max of Double and Straight Line Depreciation Method

Year Original Cost Depreciation Rate Accumulated Depreciation Straight Line Depreciation Cost
Year 1 10000 0.4 0
```Maximum([(10000-0)*0.4],[(10000-0)/5])
= Maximum(4000, 2000) = 4000```
which is 333.33 per month.
Year 2 10000 0.4 4000
```Maximum([(10000-4000)*0.4],[(10000-4000)/4])
= Maximum (2400, 1500) = 2400```
which is 200 per month.
Year 3 10000 0.4 6400
```Maximum([(10000-6400)*0.4],[(10000-6400)/3])
= Maximum (1440, 1200) = 1440```
which is 120 per month.
Year 4 10000 0.4 7840
```Maximum([(10000-7840)*0.4],[(10000-7840)/2])
= Maximum (864, 1080) = 1080```
which is 90 per month.
Year 5 10000 0.4 8920
```Maximum([(10000-8920)*0.4],[(10000-8920)/1])
= Maximum (432, 1080) = 1080```
which is 90 per month.