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Calculating overhead equipment costs.


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  #1  
Old 02-03-2009, 07:09 PM
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Default Calculating overhead equipment costs.

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I pretty much know exactly what I need to charge to make a good profit. One of the things that I am struggling with a little is how to "exactly" figure your overhead expenses when it comes to the equipment. I have seen some guys figure in what it would costs to replace their equip. in a fisical year and others who would figure it over the life spand of the equip. This is where I am confused. If you do large equip., this makes your overhead extremely high.

I am looking for a bullet proof way to figure my overhead costs!
This is a fantastic question posted in another post by BNC.

My view is you have to figure the overhead equipment costs over the life of the equipment.

I do agree with large equipment the overhead is extremely high. If you buy a piece of equipment, it must pay for itself and make you a profit or it was a bad investment and you should have instead rented it.

If you buy a backhoe, you will be able to dig faster and you will charge more for the time you are using it than if you manually dug, but it improves productivity so ultimately the customer should be happier with the value they are getting.

Any thoughts on this?
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Old 02-04-2009, 04:10 AM
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Quote:
Originally Posted by Steve View Post
This is a fantastic question posted in another post by BNC.

My view is you have to figure the overhead equipment costs over the life of the equipment.

I do agree with large equipment the overhead is extremely high. If you buy a piece of equipment, it must pay for itself and make you a profit or it was a bad investment and you should have instead rented it.

If you buy a backhoe, you will be able to dig faster and you will charge more for the time you are using it than if you manually dug, but it improves productivity so ultimately the customer should be happier with the value they are getting.

Any thoughts on this?
Ive extracted my method of calculating my equipment overheads from my spreadsheets and converted it to a text file which can be imported to a spreadsheet
It allows you to calculate the net hourly charge out for each item of equipment you own
Have a look here http://c4trash.bravehost.com/Equipment2.txt
Save it as a txt file then open it in your spreadsheet as Tab Delimited
Feel Free to give me any feedback
If you like it then maybe someone could convert it to use on the forum as an online version
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Old 02-04-2009, 05:27 AM
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I was trying to get the file open and this is what I got so far. Does this look correct to you or no?

These are the instructions I found to open such a file in open office.
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File Type: jpg equipment-spreadsheet-screencap.jpg (205.9 KB, 36 views)
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Old 02-04-2009, 07:35 AM
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Default Calculating overhead

I could not get it open either.
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Old 02-08-2009, 06:17 PM
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Originally Posted by bnclawncare View Post
I could not get it open either.
I will need to go and check it
My computer is down right now am at Local Internet Cafe
I dont use Open Office so will need to have a look at it
It was created in MSExcel and saved as a Txt File Tab Delimited
I was then able to open it in both Note Pad and Word Pad and import it back to Excel
Give me a few days untill I get my system back online

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Old 02-08-2009, 06:54 PM
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Originally Posted by c4trash View Post
Ive extracted my method of calculating my equipment overheads from my spreadsheets and converted it to a text file which can be imported to a spreadsheet
It allows you to calculate the net hourly charge out for each item of equipment you own
Have a look here http://c4trash.bravehost.com/Equipment2.txt
Save it as a txt file then open it in your spreadsheet as Tab Delimited
Feel Free to give me any feedback
If you like it then maybe someone could convert it to use on the forum as an online version
I just checked and when I was playing setting up the Website I accidently deleted it

Basically to calculate my cost per item I take into account the following
In all cases my costs for all items are based on The Maximum price /gal /pint or item I paid for them over the last 12 months which means the charge / tem will remain quite good for a considerable period

This way should prices go up you arent out of pocket or have to increase prices If they go down or you get more that the recommended life from it you make money its more profit

What ever you do dont be tempted to put prices down based on Economics like the price of gas or rate of exchange for the US$

1 The maximum cost you would pay retail for the item this is the start price
2 I then went to the manufacturers web site to work out the recommended hours of use for commercial use before a major overhaul was required
3 I then allow what ever % the local tax laws allow for for depreciation ( this gave me my Salvage cost) based on the recommended working hours because in my opinion if its going to cost money to be overhauled then its past its use by date
4 Once I have the salvage value I then add in a figure for Gas based on maxium prices /gal also the tank size and for the reccomended life If you already have a similiar item and keep good records you can do this from your records)
I also add a figure in for Trimmer Cord , Mower and trimmer Blades and similiar items used in the maitaince and repair of the item over the period
Once you have that total just divide it by the Manufacturers recommended life
What ever the rate comes out to then that is my charge out rate/hour for that item
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