QuickBooks Job Costing - Determining Equipment Costs Per Hour

by Lee Smith Technical Support

Determining the cost-per-hour for each piece of equipment or machinery that your company owns and uses on a job site is a great tool for understanding, and even eventually, recouping the actual cost of the machine itself. Once you have this information, you can improve the accuracy of your bidding, book equipment and machinery costs in your accounting software, and even identify ways in which you can maximize expenditures throughout the year.

Notes: Your dealer should have data regarding estimated lifetime maintenance cost and fuel consumption. If you buy used equipment, cost it out using the "new" purchase price. The total cost-per-hour is usually the same for new and used equipment, and useful life, repair and maintenance costs, are easier to determine for new equipment. Using the new purchase price also automatically adjusts your rates for inflation and price increases.You can cost out leased machines using the same formulas and adjusting the life expectancy, lifetime maintenance and fuel price, to account for the shorter term.

To determine fuel cost, you can also fill up the tank and divide the fill-up price by the total running hours.

Even if you prefer to base your estimates on a per-labor-hour rate, the Cost-Per-Hour method prevents you from understating or overstating the actual equipment cost for the job being bid.

You can verify your Cost-Per-Hour figures in several ways:

Compare your hourly rates to those of your local equipment rental company. Reduce their rental rates by 40-50% to remove their markups. Your rates should be reasonably close to theirs.

Contact your local dealer to verify maintenance costs, production rates, fuel consumption, lifetime hours, etc.

Contact your local Department of Transportation (DOT) office, they have manuals containing CPH data for maintenance, and will often share these figures with you for comparison purposes.

Ways in which you can reduce your Cost-Per-Hour figures:

Take advantage of multi-unit discounts offered by some manufacturers.

Check with your local dealer about new engine technologies.

Use the CPH calculations to develop a better understanding of which piece(s) of equipment will lower your field operation costs over time.

You can also use the Equipment Cost-Per-Hour (ECPH) to develop a better understanding of which pieces of equipment, or brand, could actually lower your field operation costs over time. By matching up the purchase price of several different pieces of machinery against long-term variables, such as annual maintenance cost and serviceability, production rates, fuel costs, etc., the ECPH will help you to confirm the truth of you get what you pay for.

Armed with the knowledge of equipment cost-per-hour, bring this into your accounting program and job costing. This will help you to take the "guess-work" out of future bidding and increase your company's bottom line.

Once you know your Equipment Costs per hour, use QuickBooks to track these costs for job costing purposes by downloading our FREE 17-page eBook "Advanced Job Costing - Getting Equipment Costs into Job Costing" by clicking here.

Nancy Smyth is a Certified QuickBooks ProAdvisor and Intuit Gold Developer specializing in offering QuickBooks users an easy and efficient means of complying with Federal and State Prevailing Wage Laws and generate certified payroll reports from QuickBooks data. For additional information on Certified Payroll Solution.

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