Contract Manufacturing, Job Shop Quoting & Make-to-Order calculator
Setup Amortization Calculator
Setup amortization is how a job shop converts the non-recurring labor of getting a job running — programming, fixturing, tool loads, first-article prove-out — into the setup dollars it can actually recover on a quote. Estimators and quoting engineers use it to make sure the loaded cost of a setup is charged once and at the right rate, instead of being buried in piece price or absorbed entirely on a short run. It matters because setup is often the single largest fixed cost on a low-volume job, and underquoting it is the fastest way to lose money on make-to-order work. This calculator also shows the slice of setup you chose not to charge and the dollars at risk if prove-out scraps parts.
What this calculator does
- Estimate setup cost dollars that need to be recovered in a custom job quote.
- deciding how much setup cost to include in a low-volume quote or repeat order
- It computes the recoverable setup dollars by multiplying gross setup cost (hours × loaded rate) by the share you charge the customer and your expected first-pass setup success.
Formula used
- Gross setup cost before quote adjustments = setup hours for the quoted routing × loaded setup shop rate
- Recoverable setup cost = gross setup cost before quote adjustments × setup cost charged to the customer × expected setup first-pass success
Inputs explained
- Setup hours for the quoted routing:
- Loaded setup shop rate:
- Share of setup cost charged to the customer:
- Expected setup first-pass success:
How to use the result
- Use it when quoting any make-to-order or low-volume job where setup is a meaningful fraction of total cost and you need to decide how much of it to recover up front.
- It treats setup as a single lump recovered on this order; if you amortize the same setup across repeat orders or a blanket release, the per-order recoverable figure will overstate what you should charge each time.
Current U.S. benchmarks
- The U.S. prime lending rate is 6.75% (Federal Reserve via FRED, 2026-07-02). Payback and financing math should start from today's rate, not a remembered one.
Common questions
- How do you calculate setup amortization on a quote? Multiply setup hours by your loaded setup shop rate to get gross setup cost, then multiply by the percent you charge the customer and your expected first-pass setup success. With 6.5 hr, $125/hr, 100% charged and 95% success, gross is $812.50 and recoverable setup is $771.88.
- Why is the recoverable setup lower than the gross setup cost? Because the calculator discounts gross cost by your expected first-pass success. At 95% success, roughly 5% of the setup cost ($40.63 in the default example) is treated as at risk from prove-out or scrap and is not counted as cleanly recoverable.
- Should I charge 100% of setup on a one-off job? For a true one-time order, yes — set the charged share to 100% so the full gross setup ($812.50 here) is recovered. On repeat business you might charge a fraction per order and amortize the rest across the expected order stream.
- What loaded shop rate should I use for setup? Use the rate that covers the setter's wage plus burden, machine occupancy and overhead — not the bare hourly wage. $125/hr in the example is a typical loaded rate for a mid-size CNC cell; bare wage alone would undercharge the setup.
- Setup cost vs run cost — what's the difference? Setup cost is the one-time labor to get the job ready to run and is independent of quantity; run cost is the per-piece machining time that scales with lot size. Amortizing setup spreads that fixed cost so a 10-piece order isn't quoted like a 1,000-piece order.
Last reviewed 2026-05-12.