Maintenance costs – What is it, definition and concept

Maintenance costs are those related to the conservation and restoration of the assets of an individual or a company.

In day-to-day business, maintenance costs represent an important item on the volume of total fixed costs. They help to keep equipment in optimum condition and to achieve previously defined levels of efficiency.

For this reason, in the accounting management of a project or a company, these types of costs represent an important variable to take into account.

The costs related to maintenance are also independent of other magnitudes such as production or sales levels. That is, both producing 5,000 chairs and 50,000, the machinery must be properly cared for and directed to efficient production.

In other words, the preparation or accounting planning of well-defined maintenance costs is an essential productivity improvement for any organization.

Classification of maintenance costs

Formally, maintenance costs are classified within fixed-rate costs and infrastructure costs. This is because they are planned projections of expenses.

However, this is the case if we talk about a regular maintenance planned at the beginning of the year. When it comes to alleviating sporadic breakdowns or infrequent breakages, we are talking about variable cost.

The maintenance of facilities, machinery or the renewal of equipment represents a process that prevents higher total costs from being generated in the event of damage or malfunction.

Main features of maintenance costs

Compared to other cost modalities, maintenance costs bring together some distinguishable characteristics that define them:

  • Group composition: Maintenance costs include both the labor for maintenance tasks and the cost of the materials and utensils necessary for them.
  • Preventive purpose: In its fixed form of planned expenses, it supposes the efficient maintenance of the equipment as a way to avoid higher total costs due to deterioration, beyond the defined amortization tables.
  • Saving capacity: The correct execution of maintenance costs helps in the budget design, allowing the use of more funds to other items.
  • Cost calculation: The planning of maintenance costs are defined in the budgets based on the life cycles of the assets that are available. For example, a fishmonger must plan its refrigerator maintenance costs based on their amortization and useful life tables.
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Anecdotally, there are economic activities where a mode of saving in maintenance costs derives from the stoppage of the production process.

In other words, sometimes stopping production involves a lower cost calculation than would exist in a continuous model. At the same time, efficiency levels are improved.

This practice is common in industrial plants where machinery requires periods of rest for optimal operation, or in agriculture with periods of fallow.

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