Manufacturing Cost Accounting & Finance worked example

Cost Center Rate at 98% productive time ratio: a worked example

What does the result look like when productive time ratio reaches 98%? The full calculation is worked below with real intermediate numbers. A cost accountant building the costing rate for a machining cost center for the upcoming standard.

The inputs for this scenario

  • Productive Hours in Period: 1,600 hours (unchanged)
  • Cost per Hour: 55 $/hr (unchanged)
  • Productive Time Ratio: 98 % (raised for this scenario; the documented default is 85)
  • Fixed Period Cost: 8,000 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Total cost center cost = hours x cost per hour x productive ratio% + fixed period cost) to the inputs above produces each figure below.
  • At this operating point the engine returns 94,240 $ for total cost center rate cost, the number this scenario is built around.
  • At this operating point the engine returns 58.9 $ / piece for cost center rate cost per unit.
  • At this operating point the engine returns 86,240 $ for variable cost center rate cost.
  • At this operating point the engine returns 8,000 $ for fixed cost center rate adder.

How this compares with the baseline

  • Against the tool's baseline example, where productive time ratio sits at 85% and the headline result is 82,800 $, this scenario comes in 13.82% above the baseline at 94,240 $.
  • A figure at this level is achievable when productive time ratio is genuinely sustained, not just peaked for a shift. It blends all cost into one hourly figure; departments running very different machines or skill levels may need separate sub-rates to avoid averaging away real cost differences.

Results at a glance

  • Total cost center rate cost: 94,240 $ (headline result)
  • Cost center rate cost per unit: 58.9 $ / piece
  • Variable cost center rate cost: 86,240 $
  • Fixed cost center rate adder: 8,000 $

Run it with your numbers

  • Every input above is editable in the live Cost Center Rate calculator, which recalculates instantly and can be shared with the inputs intact.

Last reviewed 2026-05-12.