SMART Estimator

How to Calculate Depreciation Costs for Scaffolding Equipment Hire

  1. A Guide for Scaffold Estimators

    Calculating accurate depreciation costs for scaffolding equipment hire is crucial for ensuring your projects are profitable and well-budgeted. This article will guide you through the process, explaining what material depreciation rates are, why they matter, and how to determine overhead percentages. We’ll also provide a worked example to demonstrate the calculations in action.

    By the end, you’ll be equipped to input the correct rates into the material configuration of SMART Estimator, allowing the software to handle your material costs with precision.

  2. What are Material Depreciation Rates?

    When you own scaffolding equipment, it loses value over time due to wear and tear, usage, and age. This reduction in value is called depreciation. By calculating depreciation, you can determine how much it costs you to "hire out" the equipment for a specific period (e.g., daily or weekly).

    Understanding these rates is essential for:

    • Pricing your scaffolding hire correctly.
    • Covering the costs of replacing equipment when it’s no longer usable.
    • Ensuring competitive and fair pricing for your clients.

  3. How to Calculate Material Depreciation Rates

    To calculate the depreciation rate for your scaffolding materials, follow these steps:

    1. Determine the Initial Value

    • This is the purchase price of your scaffolding equipment.
    • Example: A scaffolding tube costs £50 when new.

    2. Estimate the Useful Life

    • How long do you expect to use this equipment before it needs replacing? Typically, scaffolding equipment lasts between 5 to 10 years, depending on usage and maintenance.
    • Example: You estimate the tube will last 8 years.

    3. Calculate the Residual Value

    • The residual value is how much you expect the equipment to be worth at the end of its useful life.
    • Example: You expect the tube to be worth £10 after 8 years.

    4. Use the Straight-Line Depreciation Formula

    Depreciation Rate = Initial Value − Residual ValueUseful Life (in years) = Depreciation Rate (per year)

    Example for Depreciation Rates:

    Depreciation Rate = £50 - £108 Years = £5 per year

    5. Convert to Weekly or Daily Rate

    Divide the yearly depreciation rate by the number of weeks (52) or days (365) in a year to find the corresponding rate.

    Example of Weekly/Daily Rates:

    Weekly Depreciation Rate = £5 (Depreciation Rate)52 (weeks) = £0.10 per week
    Daily Depreciation Rate = £5 (Depreciation Rate)365 (days) = £0.014 per day

    Material Depreciation Rate Calculator

    Use this tool to calculate the annual, weekly, and daily depreciation rates for your scaffolding materials. Enter the initial value, residual value, and useful life of the equipment.

  4. Factoring in Overhead Costs

    Overhead costs include expenses not directly tied to the equipment itself but essential for your business operations. These might include:

    • Storage and warehousing.
    • Insurance for your scaffolding materials.
    • Administration costs.

    How to Calculate Overhead Percentage

    1. Determine Annual Overheads

    • Total all annual overhead expenses related to scaffolding equipment.
    • Example: Annual overheads = £10,000.

    2. Calculate the Total Equipment Value

    • Sum the current value of all your scaffolding equipment.
    • Example: Total equipment value = £100,000.

    3. Find the Overhead Percentage

    Divide the annual overheads by the total equipment value and multiply by 100.

    Overhead Percentage = Annual OverheadsTotal Equipment Value x 100

    Example of the Overhead Formula:

    Overhead Percentage = £10,000£100,000 x 100 = 10% Overhead Percentage

    Apply the Overhead Percentage to Depreciation Rates

    To include overhead costs in your hire rates, increase the depreciation rate by the calculated percentage.

    Example:

    • Weekly Depreciation Rate: £0.10
    • Overhead: 10%

    Example:

    Adjusted Rate = £0.10 (Weekly Depreciation) + 10% (Overhead) x £0.10
    £0.10 + £0.01 = £0.11 per week

    Material Overhead Percentage Calculator

    Use this tool to calculate your material overhead percentage. Enter your total annual overheads and total equipment value to get started.

  5. Worked Example

    Equipment: Scaffolding Tube

    • Initial Value: £50
    • Residual Value: £10
    • Useful Life: 8 years
    • Overhead Percentage: 10%

    Step-by-Step Calculation

    1. Calculate Annual Depreciation:

    Annual Depreciation = £50 – £108 Years = £5 per year

    2. Convert to Weekly Rate:

    Weekly Depreciation = £5 (Annual Depreciation)52 (weeks) = £0.10 per week

    3. Add Overheads:

    Adjusted Hire Rate = £0.10 (Weekly Depreciation) + 10% (Overhead) x £0.10
    £0.10 + £0.01 = £0.11 per week

    Your adjusted hire rate for the scaffolding tube, including depreciation and overheads, is £0.11 per week.

  6. Using these Rates in SMART Estimator

    Once you've calculated the depreciation rates for all your scaffolding materials, enter them into the material configuration of SMART Estimator. The software will then automatically include these costs in your project calculations, saving you time and ensuring accuracy.

    For advice on how to enter your new Material rates into SMART Estimator Click here.

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