Equipment costing is how a contractor charges equipment to the jobs that use it. For rented equipment it’s simple: the rental invoice goes to the job. For owned equipment, the company sets internal hourly or daily rates covering ownership costs (depreciation, financing, insurance, taxes, storage) and operating costs (fuel, maintenance, repairs, tires). Jobs are charged those rates as equipment is used, and the charges offset the equipment’s actual costs in an equipment cost center.
Why it matters
If owned equipment isn’t charged to jobs, jobs look more profitable than they are and the equipment cost lands in overhead, where nobody manages it. If rates are too high or too low, the error shows up as a large over- or under-recovery in the equipment cost center at year-end. Good equipment costing also tells you when to sell, rent or buy.
Worked example
Illustrative: an excavator costs $62,000 a year to own and $38,000 a year to operate. Expected use is 1,250 hours.
- Internal rate: ($62,000 + $38,000) / 1,250 = $80 per hour
- A job using it for 140 hours is charged $11,200 under the equipment cost type.
If the machine only runs 900 hours, the company recovers $72,000 against $100,000 of cost, a $28,000 under-recovery.
Common mistakes
- Never revisiting rates after fuel or insurance costs change.
- Charging equipment to jobs only when someone remembers to log it.
- Ignoring idle time on long jobs where a machine sits on site.
How os.construction handles it
We’re building equipment usage capture into the daily log, so hours flow to job cost at your rates. Equipment rate management is being scoped with founding contractors.