Depreciation would be typically over the real useful life of the asset. Labor utilized in repairs are fully loaded and charged to the "equipment P&L. Substantial "rebuilds" are capitalized for financial purposes and amortize over the extended life of the asset. Gains and losses on sales of used equipment are recorded in this profit center. Assets that "sit on a job" and not utilized are charged to the job for the days "on site"...so as to make equipment use accountable to the job managers.We see all too often that equipment owned is not charged to job cost, and this distorts job profit/loss. Also, investment decisions are segregated and reviewed more accurately so that companies don't become equipment poor. We generally recommend that the asset interest cost from financing is charged to the equipment profit center, along with the noted depreciation, repairs, maintenance, labor factors, cleaning costs, equipment transport, insurance, and fuel (all costs directly related to the operation of the piece of equipment ). In calculating the costing to a job, either the cost of rental (if available) is used, or the daily cost of the equipment is precalculated when acquired based on estimated use in the calendar year (days) and total costs of depreciation, interest, fuel use, repairs, maintenance, insurance, internal maintenance labor, etc. are totaled; increased by the desired ROI on owning the equipment percentage; and that total cost and profit is divided by number of estimated days to be utilized as a minimum acceptable standard for that year (or part of the year if acquired during the year). The "sanity check" is that it can't be greater than the cost to rent daily/weekly/monthly as would have been the process if not owned. Each year the standards are review and revised as to the equipment cost to be utilized based on better information learned or job type and use projections...and changes are made to lease rates for that coming year.Some clients don't want to go through this process (I think that is a mistake) and utilize the annual "sanity check" at least, using labor hours (if high labor intensive work) or estimated days used are recorded and totaled...then all costs including interest, insurance, depreciation (utilizing useful life standards) and other direct costs including labor for maintenance/repairs are divided by that factor and "generally compared" to cost to rent (estimated generally also by taking a sample of easy to identify equipment).When you "charge as you go" with labor utilization and all costs divided by that their can be distortions. If you account for them somehow effectively, the the method using actual costs divided by labor hours on the job for a month or quarter (as estimated cost to complete is calculated) can work...but remember that the concept of equipment "buy-rent" profit or loss becomes loaded into the jobs and it may distort job profits/losses.
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