Equipment maintainability is liable to change with change in technology, personnel skill and environment. Therefore, the cost of using such equipment for production activities will be affected depending on the level of skill of the maintenance personnel and technology involved. Hence, maintainability of production facility has a role to play in arriving at a realistic cost of operating it. However, activity-based costing that has been widely used for job costing has failed to include maintainability cost into the job costing procedure. The study developed an activity-based job costing model on lathe with the inclusion of maintainability scenario. First, activity-based costing method was used in estimating costs of job handling, machining, cutting tool, and material. Second, maintainability of the lathe machine was assessed based on its conceptual and hierarchical configuration. The lathe’s components’ maintenance accessibility at a predetermined level of personnel skill was routed and time of maintenance was estimated for every branch. The hourly maintainability cost was estimated utilizing failure probabilities of lathe’s components based on exponential distribution. The total cost of job operated on lathe machine was estimated by summing up the maintainability cost with other activity-based cost elements. The result obtained when the model was tested with jobs of cast iron and mild steel material, using similar cutting tools, showed that there was no significant difference between traditional activity-based costing method and the new approach (less than 5%). However, it was evident that the cost difference may be substantial for a complex job that takes several hours to accomplish.