EQUIPMENT RATES – ALL COSTS

The machine rate is usually, but not always, divided into fixed costs, operating costs, and labor costs. For certain cash flow analyses only items which represent a cash flow are included. Certain fixed costs, including depreciation and sometimes interest charges, are omitted if they do not represent a cash payment. In this manual, all fixed costs discussed below are included. For some analyses, labor costs are not included in the machine rate. Instead, fixed and operating costs are calculated. Labor costs are then added separately. This is sometimes done in situations where the labor associated with the equipment works a different number of hours from the equipment. In this paper, labor is included in the calculation of the machine rate.

Fixed Costs are those which can be predetermined as accumulating with the passage of time, rather than with the rate of work. They do not stop when the work stops and must be spread over the hours of work during the year. Commonly included in fixed costs are equipment depreciation, interest on investment, taxes, and storage, and insurance.

Operating Costs vary directly with the rate of work. These costs include the costs of fuel, lubricants, tires, equipment maintenance and repairs.