# Machine Hour Rate Calculator for Job Shops and CNC Machine Shops

> Source: https://netray.co/tools/job-shop-machine-hour-rate-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Work out a loaded hourly rate for a CNC machine or work center and see how utilization changes it.

## Category

cost-finance

## Industry

Job Shop Manufacturing

## Audience

- Estimator
- Shop owner
- Controller

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Machine purchase cost

**Key:** machine_cost

**Type:** number

**Default:** 180000

**Min:** 0

**Step:** 5000

**Unit:** $

#### Residual value

**Key:** residual

**Type:** number

**Default:** 15

**Min:** 0

**Max:** 90

**Step:** 1

**Unit:** %

**Help:** Expected resale value as a share of purchase cost

#### Depreciation life

**Key:** life_years

**Type:** number

**Default:** 10

**Min:** 1

**Step:** 1

**Unit:** years

#### Cost of capital

**Key:** interest

**Type:** number

**Default:** 8

**Min:** 0

**Step:** 0.5

**Unit:** %/yr

#### Annual maintenance and spares

**Key:** maint_pct

**Type:** number

**Default:** 4

**Min:** 0

**Step:** 0.5

**Unit:** % of cost

#### Average connected power

**Key:** kw

**Type:** number

**Default:** 15

**Min:** 0

**Step:** 1

**Unit:** kW

**Help:** Use average running load, not nameplate

#### Electricity rate

**Key:** kwh_rate

**Type:** number

**Default:** 0.12

**Min:** 0

**Step:** 0.01

**Unit:** $/kWh

#### Floor and facility cost for machine

**Key:** sqft_cost

**Type:** number

**Default:** 6000

**Min:** 0

**Step:** 500

**Unit:** $/yr

#### Available hours per year

**Key:** avail_hours

**Type:** number

**Default:** 4000

**Min:** 1

**Step:** 100

**Unit:** hours

#### Utilization

**Key:** util

**Type:** slider

**Default:** 65

**Min:** 20

**Max:** 95

**Step:** 1

**Unit:** %

#### Operator wage

**Key:** wage

**Type:** number

**Default:** 28

**Min:** 0

**Step:** 1

**Unit:** $/hr

#### Labor burden

**Key:** burden

**Type:** number

**Default:** 30

**Min:** 0

**Step:** 1

**Unit:** %

#### Operator attendance

**Key:** attend

**Type:** slider

**Default:** 60

**Min:** 10

**Max:** 100

**Step:** 5

**Unit:** %

**Help:** Share of machine time one operator is tied to the machine

#### Target margin on rate

**Key:** margin

**Type:** number

**Default:** 20

**Min:** 0

**Max:** 80

**Step:** 1

**Unit:** %

**Outputs:**

#### Productive hours per year

**Key:** prod_hours

**Expr:** avail_hours * util / 100

**Format:** number

#### Annual depreciation

**Key:** depr

**Expr:** machine_cost * (1 - residual / 100) / life_years

**Format:** currency

#### Annual cost of capital

**Key:** capital

**Expr:** machine_cost * (1 + residual / 100) / 2 * interest / 100

**Format:** currency

#### Annual machine fixed cost

**Key:** fixed

**Expr:** depr + capital + machine_cost * maint_pct / 100 + sqft_cost

**Format:** currency

#### Machine cost per productive hour

**Key:** machine_rate

**Expr:** fixed / prod_hours + kw * kwh_rate

**Format:** currency

**Description:** Fixed cost spread over productive hours, plus power per hour

#### Labor cost per productive hour

**Key:** labor_rate

**Expr:** wage * (1 + burden / 100) * attend / 100

**Format:** currency

#### Total cost rate per hour

**Key:** cost_rate

**Expr:** machine_rate + labor_rate

**Format:** currency

**Primary:** true

#### Rate at target margin

**Key:** sell_rate

**Expr:** cost_rate / (1 - margin / 100)

**Format:** currency

**Primary:** true

**Description:** Cost rate divided by one minus margin

**Chart:**

#### Hourly rate versus utilization

**Type:** line

**X:** util

**From:** 30

**To:** 95

**Steps:** 27

**Series:**

- cost_rate
- sell_rate

**Disclaimer:** This is a simplified model. It leaves out tooling, general overhead, programming and supervision, which many shops add separately or as a burden rate. Review your own accounting treatment.

## Content

**Intro:** Quotes lose money when the hourly rate is a guess. This calculator builds a rate for one machine from cost, depreciation, power, maintenance, space and labor, then shows how sensitive it is to utilization.

**Sections:**

#### How to use it

**Body:** Enter the machine's purchase cost, residual value and life, then yearly maintenance, power and space cost. Set available hours to what the machine could run, and utilization to the share you actually fill. Add the operator wage and burden, and attendance for how much of the time the operator is tied to this machine. The tool outputs a cost rate and a rate at your target margin.

**Bullets:**

- Use realistic utilization, not the sales brochure
- Include the operator share, especially for multi-machine tending
- Recalculate after buying or selling machines

#### The method

**Body:** Annual depreciation is cost times one minus residual, divided by life. Cost of capital is applied to the average investment, which is the mean of purchase cost and residual. These are added to maintenance and space for the yearly fixed cost, divided by productive hours, with power added per hour. Selling rate is cost divided by one minus the margin, so margin is a share of price.

#### Reading the chart

**Body:** The chart shows how rates climb as utilization falls, because fixed costs spread over fewer hours. Many shops see a large jump below 50 percent. If your actual utilization is far below your assumption, jobs priced at the higher figure will not recover cost. Use the chart to decide whether to quote at a utilization you can honestly achieve.

**Cta:** If you want actual utilization pulled from your ERP or shop floor data and fed into rates automatically, Netray can help set up a read-only report.

**Faq:**

#### What is a typical CNC machine shop rate?

**Answer:** Rates vary widely by machine type, region and labor cost. Basic three-axis mills sit lower than five-axis or large horizontal machines. Calculate your own instead of copying market numbers.

#### Should depreciation use tax or book values?

**Answer:** For quoting, use realistic economic life and replacement cost. Tax depreciation often differs and can understate what it costs to keep capacity.

#### How do I include overhead?

**Answer:** Either add it to the labor burden percent or apply a separate overhead rate on top of the cost rate. Do not count the same cost twice.

#### Why does utilization matter so much?

**Answer:** Most machine costs are fixed. When the machine runs fewer hours, each hour must carry a larger share, so the hourly cost rises sharply as utilization falls.

## Search terms

machine hour rate calculator, CNC shop rate calculator, machine shop hourly rate, how to calculate shop rate, job shop burden rate, machining cost per hour, work center rate ERP

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