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Have you ever calculated your machine hourly rate?
August 19, 2026
This is the most commonly skipped number in a machine shop. Material prices are known, labour is roughly known, but what one hour of a machine costs has usually either never been calculated or was worked out once, years ago, and forgotten.
Why does it matter?
If the machine hourly rate is not entered, the machine line in work order costing counts as zero. The part looks cheaper than it is, the margin looks healthy and you feel safe quoting — while in reality you kept a five-axis machining centre busy for eight hours.
The calculation
Hourly rate = (annual depreciation + energy + maintenance + rent share + other fixed costs) ÷ planned annual running hours
The denominator is not an estimate. It comes from the shift calendar: how many shifts you run, how many days a year, and what is left after breaks and public holidays. If maintenance costs are tracked in the system, spare parts, labour and external service enter the calculation on their own.
Calculate it per machine. A twenty-year-old manual lathe and a pallet-changing machining centre bought last year can differ by a multiple; costing both at the same rate hides which job actually earns money.
Keep an effective date
When energy prices rise you update the rate, but old work orders must keep the old one. Otherwise past reports are recalculated with today's figure and two periods stop being comparable.
What happens next
Once the rate is in, every work order multiplies its actual machine time by it. The real cost of a finished job then appears in front of whoever prices the next quotation for the same part — the price stops being a memory exercise.