What is true about depreciation in the context of material items?

Depreciation refers specifically to the reduction in value of tangible assets over time due to wear and tear, age, or obsolescence. In the context of material items, it recognizes that these assets lose value as they are used or as they become outdated. Therefore, when assessing loss or damage, it is crucial to account for depreciation in material items to ensure that the compensation reflects the current value rather than the original purchase price.

In this scenario, stating that depreciation is applied only to material items is correct. Labor is generally not depreciated in the same manner because it does not fit the definition of tangible belongings that lose value over time; instead, labor costs are usually considered expenses incurred during the repair or reconstruction process.

When dealing with depreciation calculations, it is generally focused only on physical assets, making the other options less accurate in this context. For instance, while calculating depreciation can be done on a project basis and can intersect with repairs and maintenance contextual discussions in terms of financial projections, it fundamentally applies to material items only in this scenario.