Hong Life CalculatorsUnderstanding the equipment depreciation per month — concept and principle
A laptop, camera or machine is not a one-off expense: it is used up gradually over several years. This calculator spreads the net cost of a piece of equipment evenly across the months you expect to use it, and then over your billable hours, so you can see how much each month and each paid hour must contribute to replace it. Freelancers and small businesses use it when setting rates or budgeting for upgrades. It works with any currency.
How it is calculated
- Cost per month = (purchase price − resale value) ÷ (years used × 12)
- Cost per billable hour = cost per month ÷ billable hours per month
Purchase price is what you pay, including set-up. Resale value is what you expect to get back when you sell or trade it in (often called salvage or residual value). Years used is the useful life, and billable hours is how many hours a month you charge to clients.
The principle
This is the straight-line method, the simplest and most common way to depreciate an asset. What you really lose is not the full price but the difference between what you pay and what you recover at the end. Spreading that loss in equal monthly slices assumes the equipment gives roughly the same value every month of its life. Dividing by billable hours converts the cost into something you can build into an hourly rate, because only paid hours generate the money to replace the asset.
Worked example
- Net cost = $2,400 − $400 = $2,000.
- Months of use = 3 × 12 = 36.
- Cost per month = 2,000 ÷ 36 = $55.56.
- Cost per billable hour = 55.56 ÷ 110 ≈ 0.505, shown as $0.51.
How to read the result
The monthly figure is the amount to set aside if you want the cash ready when the item needs replacing. A small per-hour figure like $0.51 shows that a single tool rarely drives your rate, but the total for all equipment, software and office costs can. A shorter life or lower resale value raises the cost; using the item for more billable hours lowers it.
Common mistakes
- Using the full purchase price and ignoring resale value, which overstates the cost.
- Choosing an unrealistically long life for fast-ageing tech such as phones or laptops.
- Dividing by all hours worked rather than billable hours.
- Treating this figure as the depreciation allowed for tax.
FAQ
Frequently asked questions
Is straight-line the only method?
No. Declining-balance methods charge more in the early years, which can better match how quickly electronics lose value. Straight-line is easier to plan with.
What if I expect no resale value?
Enter 0. The whole purchase price is then spread over the life.
Should repairs be included?
Expected maintenance is usually budgeted separately as a running cost, but you can add it to the price if you want one combined figure.
Sources: IFRS Foundation — IAS 16 Property, Plant and Equipment · Horngren, Datar & Rajan — Cost Accounting: A Managerial Emphasis (Pearson)