How should owned equipment unit cost be calculated?

Calculating the owned equipment unit cost is best achieved by dividing the total yearly cost by the number of hours the equipment is used per year. This method gives a clear picture of the fixed costs associated with operating the equipment, including depreciation, maintenance, repair, insurance, and financing costs, spread over the hours it is actively used. By determining the per-hour cost, a contractor can effectively budget for equipment expenses on a project basis and make more informed decisions regarding the use of owned equipment versus renting or leasing alternatives.

This approach allows for a standardized way to assess the cost associated with operating equipment, making it easier to estimate project costs and evaluate profitability. It ultimately provides more accurate financial forecasting and job costing, essential for the successful management of construction projects.