BIZOMAT MAKEOS · Money
Machine Rate Quote Check (Hour Rate, Job Cost, Margin)
What does an hour on this machine really cost, what does this job cost per part at that rate, and does my quoted price give the margin I need?
Check of a quoted part price against the true cost of the machine: capital recovery from price, resale value, life and interest, with floor space, maintenance, power and tooling per productive hour, plus the operator (as the machine hour rate tool); the job hours from set-up and cycle time, the job cost with material, cost per part, margin at the quoted price and the least price for the margin you want.
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How this tool works
Inputs, units and where to find them
| Input | Unit | Typical source |
|---|---|---|
| Machine | ||
| Installed machine cost | AUD | Cost of the machine installed and commissioned. |
| Resale value at end of life | AUD | Expected resale value at the end of its life. |
| Economic life | years | Years over which the machine must pay for itself. |
| Interest (discount) rate | % | Interest or required return on capital. |
| Productive hours per year | h | Hours per year the machine actually makes parts. |
| Floor space cost per year | AUD/yr | Cost per year of the floor space it occupies. |
| Average power drawn when running | kW | Average electrical power while running. |
| Electricity price | AUD/kWh | Electricity price. |
| Maintenance per year | AUD/yr | Maintenance and repairs per year. |
| Tooling and consumables per hour | AUD/h | Tooling and consumables per running hour. |
| Operator cost per hour (fully loaded) | AUD/h | Fully loaded cost of the operator per hour. |
| Job | ||
| Set-up time | h | Set-up time for the job. |
| Cycle time per part | min | Machine cycle time per part, including load and unload. |
| Quantity | Number of parts in the job. | |
| Material and bought-in cost per part | AUD | Material and bought-in items per part. |
| Quoted price per part | AUD | Price per part you intend to quote. |
| Margin wanted | % | Margin on price you need. |
What each input means
Open an input to see what it is, its units, the worked example and the common mistakes, with a small diagram.
Machine
What this means: Installed machine cost
- What it is
- The total cost of getting the machine ready to make parts: purchase price plus freight, foundations, installation and commissioning.
- Units and format
- Enter a number in AUD: Australian dollars. The form accepts 0.000001 AUD or more. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 350000 AUD as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- A higher cost raises capital recovery, the hourly rate and the cost per part.
- Get it right
- Use the full installed cost, not the quoted machine price alone.
What this means: Resale value at end of life
- What it is
- What you expect to sell the machine for at the end of its economic life, net of removal costs.
- Units and format
- Enter a number in AUD: Australian dollars. The form accepts 0 AUD or more. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 50000 AUD as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- A higher resale value lowers the capital recovery per year.
- Get it right
- It must be less than the installed cost; be cautious, as resale values of specialised machines are often low.
What this means: Economic life
- What it is
- The number of years over which the machine must recover its cost, usually the period before you expect to replace it, not its physical life.
- Units and format
- Enter a number in years: years. The form accepts 1 years to 50 years. Use a whole number. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 10 years as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- A longer life spreads the capital over more years and lowers the hourly rate.
- Get it right
- Use years, not productive hours.
What this means: Interest (discount) rate
- What it is
- The yearly interest or required return on the money tied up in the machine, as set by your finance team or lender.
- Units and format
- Enter a number in %: percent: the number is read as a percentage, so type 8 for 8 %. The form accepts 0% to 100%. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 8% as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- A higher rate raises the capital recovery per year.
- Get it right
- Type the percentage itself (for example 8, not 0.08). Zero gives straight-line recovery with no interest.
What this means: Productive hours per year
- What it is
- The hours per year the machine actually makes parts, after allowing for idle time, breakdowns, holidays and shifts not worked.
- Units and format
- Enter a number in h: hours. The form accepts 0.000001 h to 8784 h. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 3000 h as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Yearly capital, space and maintenance costs are divided by these hours, so fewer hours give a higher rate.
- Get it right
- Use realistic productive hours; dividing yearly costs by planned or available hours understates the rate.
What this means: Floor space cost per year
- What it is
- The yearly cost of the floor area the machine and its working space occupy: rent or building cost per square metre times the area.
- Units and format
- Enter a number in AUD/yr: Australian dollars per year. The form accepts 0 AUD/yr or more. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 8000 AUD/yr as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Added to the fixed yearly costs spread over productive hours.
- Get it right
- Include access and material storage space around the machine, not just its footprint.
What this means: Average power drawn when running
- What it is
- The average electrical power the machine draws while it is running parts, from a power meter or the motor loads and duty, not the nameplate maximum.
- Units and format
- Enter a number in kW: kilowatts. The form accepts 0 kW to 100000 kW. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 12 kW as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Power cost per hour = this power × electricity price.
- Get it right
- Nameplate kW overstates the average; idle time is not charged here because the rate is per productive hour.
What this means: Electricity price
- What it is
- What you pay for each kilowatt hour of electricity, from your power bill, including network and usage charges.
- Units and format
- Enter a number in AUD/kWh: Australian dollars per kilowatt-hour. The form accepts 0 AUD/kWh to 100 AUD/kWh. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 0.25 AUD/kWh as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Power cost per hour = average kW × this price.
What this means: Maintenance per year
- What it is
- The yearly cost of keeping the machine running: service contracts, spare parts, repairs and maintenance labour.
- Units and format
- Enter a number in AUD/yr: Australian dollars per year. The form accepts 0 AUD/yr or more. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 12000 AUD/yr as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Divided by productive hours and added to the hourly rate.
- Get it right
- Use your maintenance records or the maker’s service cost estimate.
What this means: Tooling and consumables per hour
- What it is
- The cost of cutters, inserts, coolant and other consumables used up for each hour the machine runs.
- Units and format
- Enter a number in AUD/h: Australian dollars per hour. The form accepts 0 AUD/h to 1000000 AUD/h. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 15 AUD/h as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Added directly to the machine hourly rate.
- Get it right
- This is per running hour; convert a cost per part or per month to hours first.
What this means: Operator cost per hour (fully loaded)
- What it is
- The full cost of the operator for each hour: wage plus superannuation, payroll tax, leave, workers’ compensation insurance and other on-costs.
- Units and format
- Enter a number in AUD/h: Australian dollars per hour. The form accepts 0 AUD/h to 1000000 AUD/h. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 65 AUD/h as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Added to the machine rate to give the total hourly rate.
- Get it right
- If one operator runs several machines, enter only the share of cost charged to this machine.
Job
What this means: Set-up time
- What it is
- The time to set up the machine for this job: changing fixtures and tools, loading the program and proving the first part.
- Units and format
- Enter a number in h: hours. The form accepts 0 h to 10000 h. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 2 h as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Set-up hours are charged once per job, so their share per part falls as quantity rises.
- Get it right
- Enter hours; 30 minutes is 0.5 hours.
What this means: Cycle time per part
- What it is
- The machine time to make one part, including loading and unloading.
- Units and format
- Enter a number in min: minutes. The form accepts 0.000001 min to 100000 min. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 6 min as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Job hours rise by quantity × this time ÷ 60.
- Get it right
- Enter minutes per part; set-up time is separate.
What this means: Quantity
- What it is
- The number of parts in this job or batch, over which the set-up cost is shared.
- Units and format
- Enter a plain number with no unit. The form accepts 1 to 100000000. Use a whole number. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 100 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Larger quantities spread the set-up cost and lower the cost per part.
What this means: Material and bought-in cost per part
- What it is
- The cost of the raw material and any bought-in items for one part, including an allowance for offcuts and scrap.
- Units and format
- Enter a number in AUD: Australian dollars. The form accepts 0 AUD to 100000000 AUD. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 4.5 AUD as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Added directly to the cost per part.
What this means: Quoted price per part
- What it is
- The price per part you intend to quote to the customer, excluding GST.
- Units and format
- Enter a number in AUD: Australian dollars. The form accepts 0 AUD or more. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 22 AUD as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- A higher quote raises the margin; it does not change the cost.
- Get it right
- Enter the price per part, not the total job price.
What this means: Margin wanted
- What it is
- The margin you need as a share of the selling price, so that (price − cost) ÷ price reaches this figure.
- Units and format
- Enter a number in %: percent: the number is read as a percentage, so type 8 for 8 %. The form accepts 0% to 95%. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 15% as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- The least price = cost per part ÷ (1 − margin ÷ 100).
- Get it right
- This is margin on price, not markup on cost; the same percentage gives a lower price as markup.
Method and formulas
- Capital recovery = (price − resale) × A/P + resale × i; machine rate = (capital + space + maintenance) ÷ hours + power + tooling; total = machine + operator (as the machine hour rate tool).
- Job hours = set-up + quantity × cycle ÷ 60; job cost = hours × total rate + quantity × material; cost per part = job cost ÷ quantity.
- Margin = (quote − cost per part) ÷ quote; least price = cost per part ÷ (1 − margin wanted).
- Example: the machine costs 105.9 AUD/h with its operator; the job costs 17.208 AUD a part, so 22 AUD gives 21.78% margin.
Limitations
- General overheads beyond the machine (sales, admin, profit share) are not included unless added to the rates.
- Assumes the productive hours per year are achieved; idle time raises the true rate.
- Example values are illustrations. Replace them with values for your actual task.
Typical uses
- Check a quote before sending it
- Find the least price for a target margin
- Show customers where the hourly rate comes from
Who it is for
- Estimators
- Business owners
- Production managers
What you get
- Machine rate and total hour rate
- Job hours, job cost and cost per part
- Margin and least price
Interpreting the result
- Small batches carry the set-up time: quote set-up separately or set a minimum order.
References
- Machinery’s Handbook, 29th edition (Industrial Press, 2012), printed pp. 134–146, 1153–1160. Topic reference; no source tables or recommended settings are reproduced.
Learn the Concepts Behind This Tool
These BIZOMAT Library readings explain the method this tool uses, with worked examples.
Method explained here · BIZOMAT original book
Safety, fume, cooling and the hour rate
In Laser Processing by the Numbers
What it covers: Laser classes and guarding, fume extraction duct checks, chiller duty in hot weather, the machine hour rate of a laser cutter, quoting on full machine time, and the cell's process record.
BIZOMAT tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.
Open the Machine Rate Quote Check (Hour Rate, Job Cost, Margin) calculator