About costs of ownership

In the 8-3 Equipment window, on the Cost Recovery Worksheet tab, under Cost of Ownership, enter all the costs that you incur over the resource consumption period resulting from ownership.

• In the Overhaul box, you can enter the cost of major repair work. It can be difficult to estimate the cost of major repairs, so use an average cost if the data is available.

• In the Cost of Capital box, you can enter the opportunity cost of investing in the equipment. By investing your capital in equipment, you lose the ability to earn additional revenue through other types of investments.

  To determine the cost of capital for equipment, multiply the average equity in the equipment for the resource consumption period by the average yield you could expect from a certificate of deposit. For example, if you own a backhoe, you might have an average equity of $25,000 for the year. If you had placed that money in a safe investment with a 5% return, your cost of capital would be $1250 (25,000 x 5%).

When you calculate the rates, Sage 100 Contractor computes the actual cost of owning the equipment per unit of use, (total cost of ownership + value consumed) / estimated use = ownership rate, and displays the rate in the Ownership Rate text box.