There are many theories about this, so here are my three cents...
[Disclaimer: I am the Product Manager for Spectrum. These comments are based on my work with clients over the years.]
First of all, it always depends on your facts and circumstances...as well as what your objectives are here. Here, the theory is that we are charging the job the costs of our ownership and operating costs that relate to the specific project.
The equipment rate we charge to jobs is comprised of two components:
- Ownership / Fixed Costs - Depreciation, License, Insurance, etc
- Operating / Variable Costs - Fuel, Repairs and Maintenance, etc
So if everything was the same, we would only have one set of charge rates. This is the starting point.
Based on the job though, we can opt to increase the operating/variable portion to cover the fuel surcharges. I have also seen folks increase the operating costs as the terrain is so difficult to work in that the asset has to be repaired and requires replacement parts.
Again, just my three cents.
What do others think here?
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Geoffrey Falk CPA
Product Manager
Trimble Viewpoint Inc
Seattle WA
(206) 777-6811
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Original Message:
Sent: 06-02-2022 13:01
From: Alicia Wensmann
Subject: Consistency of Equipment Rates??
Hi everyone, should equipment rates for a given piece of equipment be consistent from one job to the next? My understanding is yes because it generally costs the same to operate a given piece of equipment for an hour on one job as it does the next.
This came up because we recently were awarded a job in which we received additional revenue to cover the increased fuel costs. It was suggested that our internal cost rates be increased for that job only. I am hesitant to do that for just one job as it doesn't seem to be true job costing - my thought is that the rates should be consistent from job to job, whether or not we get compensated for the additional fuel cost. That additional compensation would just be more margin for that job.
Thoughts? Any input would be appreciated.
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Alicia Wensmann CPA, CCIFP
Accounting Manager
Landwehr Construction, Inc.
St. Cloud MN
(320) 252-1494
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