Equipment Costing

Owners and operators of equipment operate the equipment on the basis of making a profit. To run any equipment, the following accounting items should be considered

  1. Revenue - the revenue generated from the equipment based on some measurement
  2. Expenses - the costs associated with operating the equipment for the revenue generating period
  3. Variable Costs
    1. Fuel
    2. Lubricants
    3. Tyres/Undercarriage
    4. PM Servicing & Component replacements
    5. Unplanned minor/miscellaneous repairs
    6. Operator Wages
    7. Serviceman wages
  4. Fixed Costs
    1. Finance costs
    2. Licensing
    3. Insurancee

Achieving a positive balance between the revenue generated by the equipment and the costs of operating the equipment will normally be the goal. There are many factors that can affect this such as
  • Operator of the machine
  • Severity of the Environment
  • Maintenance Regime
  • Ongoing Condition of Equipment

The maintenance of the equipment and its condition needs to be kept at a standard to ensure safe operation, high level of availability and productivity while maintaining the investment value. Where the equipment is not maintained in reasonable condition through not spending money when required in order to ensure profitability on a contract simply will mean that. A larger repair and rebuild bill will be faced after the contract period is complete just to get the equipment into a reasonably workable condition. These repair costs will be a lot higher.