What belongs in the annual ownership cost?

Maintenance, power and floor space are entered together, and depreciation is added from purchase cost and life. Insurance, tooling and property tax belong there too if they are not counted elsewhere.

Why divide by productive hours and not calendar hours?

Because the rate must recover ownership across the hours the machine actually earns. Spreading the same annual cost over 8,760 calendar hours hides the cost of downtime and makes the rate look cheaper than it is.

Does labor time match machine time?

The model assumes one operator for the machine and charges the full labor rate to each run hour. If one operator tends two machines, split the labor rate between them or use the machine rate alone.

Should interest and financing be included?

Straight-line depreciation excludes financing cost. If the machine is financed, add the annual interest to the maintenance, power and space figure so the rate covers the real cost of the asset.

Costing calculator

Machine Hour Rate Calculator

Build the hourly cost of running a machine: depreciation, maintenance, power, space and the operator. Enter the purchase cost, life, annual charges, productive hours and cycle time; the rows price the hour and the part.

What this calculator does

Loaded hourly machine rate from ownership, labor and cycle time, with the labor share of that rate.

Formula used

Annual ownership cost = machine purchase cost ÷ useful life + annual maintenance, power and space
Machine-only rate = annual ownership cost ÷ available productive hours
Loaded machine rate = machine-only rate + operator labor rate
Cost per part = loaded machine rate × cycle time ÷ 3,600 sec per hr
Labor share of rate = operator labor rate ÷ loaded machine rate × 100

Inputs explained

Machine Purchase Cost: Delivered and installed cost from the purchase record.
Useful Life: Years the machine is expected to earn its purchase cost.
Annual Maintenance, Power and Space: Maintenance, power and floor space cost from the plant accounts.
Available Productive Hours: Hours the machine is scheduled to produce each year.
Operator Labor Rate: Loaded operator rate for the machine, from payroll.
Cycle Time: Run time per part at the machine, from the routing.

How to use the result

Best suited to quoting machine time on a new part, comparing a used machine with a new one, checking make versus buy on a run.
Labor is costed at one rate for all hours; overtime premiums are outside the model. Purchase price and annual charges are historical; replacement cost may differ.

Current U.S. benchmarks

As of Sep 2026, average hourly earnings in U.S. manufacturing are $30.21 (BLS), up 3.4% from a year earlier. Burdened shop rates typically run 1.3 to 1.8 times earnings once benefits and overhead are loaded.
U.S. manufacturing runs at 75.7% of capacity (Federal Reserve, Aug 2026). New factory orders are up 8.5% year over year (Census).

Common questions

What belongs in the annual ownership cost? Maintenance, power and floor space are entered together, and depreciation is added from purchase cost and life. Insurance, tooling and property tax belong there too if they are not counted elsewhere.
Why divide by productive hours and not calendar hours? Because the rate must recover ownership across the hours the machine actually earns. Spreading the same annual cost over 8,760 calendar hours hides the cost of downtime and makes the rate look cheaper than it is.
Does labor time match machine time? The model assumes one operator for the machine and charges the full labor rate to each run hour. If one operator tends two machines, split the labor rate between them or use the machine rate alone.
Should interest and financing be included? Straight-line depreciation excludes financing cost. If the machine is financed, add the annual interest to the maintenance, power and space figure so the rate covers the real cost of the asset.

Related guides

Last reviewed 2026-10-02.