What belongs in annual fixed cost for a machine?

Everything the machine costs whether it runs or not: depreciation, loan interest, floor space, insurance and any service contract. Tooling, power, coolant and repairs rise with run hours, so they are running cost.

Why does low utilization raise fixed cost per hour but not running cost?

Because an idle machine still depreciates and takes floor space but burns no tooling or power. At $52,000 fixed cost and 4,000 scheduled hours, 65% utilization puts $20.00 on each billed hour and 45% puts $28.89.

Should the machine rate include the operator?

Not here. Cost the operator with a labor hour rate and add it per machine hour; when one operator runs two machines, each machine carries half the labor.

Should I raise the machine rate when a machine loses work?

Only as far as customers will pay. Quoting the higher rate can lose more work and raise it again; price at the utilization you can realistically book.

Contract Manufacturing, Job Shop Quoting & Make-to-Order calculator

Machine Hour Rate Calculator

Find what a billed hour on one machine costs, excluding the operator, and check it against the machine rate you quote. You need annual fixed cost, running cost per hour, scheduled hours and utilization.

What this calculator does

What one billed hour on a machine costs before the operator, and whether your quoted machine rate recovers it.

Formula used

Billable hours = scheduled hours × machine utilization
Fixed cost per billable hour = annual fixed cost ÷ billable hours
Machine hour rate = fixed cost per billable hour + running cost per machine hour
Idle capacity cost per billed hour = fixed cost per billable hour − annual fixed cost ÷ scheduled hours
Over or under recovery = quoted rate − machine hour rate; annual = per hour × billable hours

Inputs explained

Annual Fixed Cost: Depreciation, loan interest, floor space, insurance and service contract for this machine.
Running Cost per Machine Hour: Tooling, power, coolant and repairs per run hour, from last year's spend.
Scheduled Hours per Year: Staffed shifts × hours per shift × working days.
Machine Utilization: Machine hours billed to jobs ÷ scheduled hours, from job tickets.
Machine Rate in Your Quotes: Machine rate on your quoting sheet, excluding the operator.

How to use the result

Best suited to building a machine rate card, pricing a new machine before you buy it, repricing a machine that lost its main job.
A fully depreciated machine carries no depreciation here, so its rate understates the cost of replacing it. One rate per machine: a shop-wide average misprices machines whose fixed or running cost differs from it.

Current U.S. benchmarks

As of Aug 2026, U.S. manufacturing runs at 75.7% of capacity (Federal Reserve via FRED), down 0.1 points from a year earlier. Enter your own plant's utilization; the national figure is a reference point for how loaded the industry is.
The U.S. prime lending rate is 7.00% (Federal Reserve via FRED, 2026-10-02). Payback and financing math should start from today's rate, not a remembered one.

Common questions

What belongs in annual fixed cost for a machine? Everything the machine costs whether it runs or not: depreciation, loan interest, floor space, insurance and any service contract. Tooling, power, coolant and repairs rise with run hours, so they are running cost.
Why does low utilization raise fixed cost per hour but not running cost? Because an idle machine still depreciates and takes floor space but burns no tooling or power. At $52,000 fixed cost and 4,000 scheduled hours, 65% utilization puts $20.00 on each billed hour and 45% puts $28.89.
Should the machine rate include the operator? Not here. Cost the operator with a labor hour rate and add it per machine hour; when one operator runs two machines, each machine carries half the labor.
Should I raise the machine rate when a machine loses work? Only as far as customers will pay. Quoting the higher rate can lose more work and raise it again; price at the utilization you can realistically book.

Related guides

Last reviewed 2026-10-01.