# Swiss Machine Hourly Rate and Real Shop Margins > Source: https://netray.co/resources/swiss-machine-hourly-rate-and-shop-margins > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: Knowledge Base ## Short answer How to calculate a Swiss machine hourly rate and real shop margin: depreciation, utilization, tooling, labor, overhead, and why quoted margin differs from actual. ## Category erp-general ## Content **Intro:** A Swiss machine's hourly rate is the sum of its annual fixed and variable costs divided by the hours you can realistically sell, and utilization is the number that moves it most. A rate built on 6,000 hours a year when you sell 3,500 will understate cost by about 70 percent. Most turned-parts shops also discover that quoted margin and actual margin differ, because cycle times run long, scrap and rework are not in the number, and setups are under-recovered. This guide builds a defensible rate and shows how to compare quoted to actual by job. **Sections:** #### Building the Machine Rate **Body:** Start with the machine's annual costs: depreciation or lease on the machine plus bar feeder, high pressure coolant and chip handling, tooling and inserts, maintenance and spares, power, floor space, software seats for CAM, and the share of supervision and indirect labor that supports it. Divide by sellable hours, not calendar hours. Decide whether the rate includes the operator. Many shops run one operator across several machines, so labor is allocated by machine tending ratio. The structure matters less than consistency: choose one method and apply it to every quote. **Bullets:** - Depreciation, lease or cost of capital on machine and peripherals - Tooling, inserts and consumables, ideally tracked per part family - Maintenance, power and facility share - Operator and setup labor with a realistic tending ratio - Overhead allocation tied to machine hours #### Utilization Is the Number That Hides **Body:** Machines rarely cut metal for all available hours. Setups, first article approval, waiting on material, tool changes, maintenance, programming and idle time shrink productive spindle time. Lights-out running on stable repeat parts raises utilization, but only if the process is trusted. Measure two numbers separately: hours the machine ran as a percentage of hours available, and hours sold at the quoted rate. Shops that price off a theoretical 80 percent utilization while running 50 percent leave money on the table with every quote. Pull actual machine hours from the ERP or machine monitoring and recompute the rate quarterly. #### Why Quoted Margin Differs From Actual **Body:** When a job closes, compare quoted to actual on each cost line: material, setup hours, run hours, outside processing, scrap and rework, inspection and shipping. Variance usually concentrates in a few places. Actual cycle time exceeded the simulation. Setup took longer for a new part. Scrap ran above allowance on a tight-tolerance feature. A secondary operation was forgotten at quote. Customer-driven changes were not billed. Without job closeout analysis, the same errors repeat on every similar quote. Even a simple monthly review of the ten largest overruns changes behavior quickly. #### Price by Value, Not Only by Rate **Body:** Cost-plus pricing sets a floor, not a ceiling. Parts with tight tolerances, special materials, short lead times or regulated documentation such as medical traceability can command more than rate-based pricing, while commodity parts bid against many suppliers may not support your full overhead. Know which parts in your portfolio are which. Track margin by customer and part family, and be willing to reprice or decline work that consistently closes under target. Customers generally accept price increases tied to documented material and process cost changes better than unexplained ones. #### Where AI Helps and Where It Is Overkill **Body:** AI can answer margin questions that take hours in a spreadsheet: which part families closed below target margin last year, which machines show the largest gap between standard and actual cycle time, which customers' jobs repeatedly run over setup estimates. A private agent reading ERP job cost history can produce the comparison with the source jobs listed. It will not fix poor data capture. If your shop does not record actual run and setup hours reliably, fix capture first. A small shop with a few dozen jobs a month can do the same analysis in a spreadsheet. **Cta:** Netray can show quoted versus actual margin by part family from your ERP job history, privately and with every figure traced to its jobs. **Faq:** #### What is a typical Swiss machine shop rate per hour? **Answer:** It varies widely by machine capability, region and what the rate includes, so published ranges are only rough guides. Build your own from depreciation, tooling, labor, overhead and realistic sold hours rather than copying another shop's number. #### How do you calculate machine hour rate? **Answer:** Add annual machine-related costs including depreciation, tooling, maintenance, power, labor and overhead share, then divide by the hours you realistically sell. Using theoretical available hours instead of actual sold hours understates the rate. #### Why are my turned parts jobs less profitable than quoted? **Answer:** Usually because actual cycle times, setup hours or scrap exceed the quote, or because secondary operations and inspection were omitted. A job closeout review comparing each cost line to the quote finds the pattern. ## Related Slugs - gross-margin-analysis-manufacturing - syteline-costing-variance-investigation - manufacturing-costing-methods-comparison - how-to-quote-swiss-turned-parts ## Search terms swiss machine hourly rate, machine shop hourly rate calculation, cnc lathe shop rate, job costing quoted vs actual, machine shop profit margin, machine utilization rate shop --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json