What is included in downtime cost per hour?

Three components: Lost Revenue per Hour (throughput times price, or contribution margin), Direct Labor Waste (loaded hourly cost of idled workers), and Scrap and Restart Cost (material dumped at shutdown, rework, and restart energy or time). In the example, $4,500 revenue plus $600 labor equals $5,100 per hour, with scrap and restart added once per event at $200 rather than per hour.

How do I calculate the cost of a specific downtime event?

Multiply the per-hour rate by event duration, then add the one-time scrap and restart cost. For a 2-hour stop at $5,100 per hour with $200 restart: ($5,100 x 2) + $200 = $10,400. Revenue and labor scale with hours, but scrap and restart is charged once because you dump material and reheat or re-thread the line a single time regardless of how long the stop lasts.

Should I use revenue or profit margin for downtime cost?

Either works if you stay consistent. Using full Lost Revenue per Hour, say $4,500, overstates true loss because variable material and energy costs are not incurred while down. Contribution margin per hour is more defensible for financial cases. Many teams present both: revenue for urgency and margin for the finance-approved number. Whichever you pick, document it so cross-line comparisons and ROI calculations stay valid.

Is downtime cost per hour high or worth acting on?

Context matters, but $5,100 per hour is significant. Multiply by expected annual downtime hours to judge exposure: 100 hours a year is $510,000. If a predictive maintenance or spares program costs well under that annual exposure, it pays back fast. As a rule, if per-event cost like the $10,400 two-hour event exceeds the cost of the fix or spare that prevents it, act.

How do I convert downtime cost to an annual figure?

Take the per-hour cost and multiply by total unplanned downtime hours per year, then add per-event scrap and restart times the number of events. At $5,100 per hour over 100 hours you get $510,000, plus if those came from 50 events at $200 restart each, add $10,000, for $520,000 annually. Pull downtime hours and event counts from your CMMS or line stop log.

What is the difference between downtime cost and lost production cost?

Lost production cost is just the throughput piece, the units or revenue you could not make, roughly the $4,500 per hour here. Downtime cost is broader, adding idle labor ($600 per hour) and scrap plus restart ($200 per event). Lost production understates the true hit because you still pay wages and waste material during a stop. Use full downtime cost for maintenance business cases, not lost production alone.

Maintenance and Reliability

Downtime Cost per Hour Formula

Downtime cost per hour quantifies the financial impact of an unplanned equipment stop. Use it to justify maintenance spend, set response priorities, and calculate the ROI of reliability improvements.

Formula

Downtime Cost = Lost Revenue per Hour + Direct Labor Waste + Scrap and Restart Cost

Variables

Lost Revenue per Hour: Revenue the line generates when running, lost for each hour it is down
Direct Labor Waste: Labor cost per hour for workers idle during the downtime event
Scrap and Restart Cost: Material scrapped at shutdown, rework cost, and extra energy or time to restart

Understanding the Downtime Cost per Hour Formula

Downtime cost per hour turns a vague operational pain into a defensible dollar figure. It sums three buckets: revenue the line would have earned, labor you pay while people stand idle, and the scrap plus restart penalty from an unplanned stop. This matters because maintenance budgets, spare parts stocking, and response priorities all get argued in dollars. A stated $5,100 per hour makes it obvious why a $2,000 spare on the shelf or an extra technician on shift pays for itself quickly.

Lost Revenue per Hour comes from the line's throughput times price, or better, its contribution margin per hour so you are not counting revenue not truly at risk. Direct Labor Waste is the loaded hourly rate of everyone idled by the stop. Scrap and Restart is a per-event cost: material dumped at shutdown, rework, and energy or warm-up time. In the example, $4,500 plus $600 gives $5,100 per hour, and a 2-hour event plus $200 restart totals $10,400. Keep revenue and labor as hourly rates and add scrap once per event.

The per-hour figure is the number you multiply by expected annual downtime hours to size a reliability business case. If a line averages 100 unplanned downtime hours a year at $5,100, that is $510,000 exposed, which easily justifies a predictive maintenance program costing a fraction of that. Compare cost per hour across lines to prioritize where reliability spend lands first. Document whether you used revenue or margin, because mixing the two across lines makes the comparison meaningless.

Worked Example

A line generates $4,500/hr in revenue when running. Idle labor costs $600/hr. Scrap and restart averages $200 per event.

Downtime cost per hour = $4,500 + $600 = $5,100/hr
For a 2-hour event with restart cost: ($5,100 x 2) + $200 = $10,400

Result: $5,100 per hour of downtime; $10,400 for a 2-hour event

Common Mistake

Using revenue per hour without checking margin. Lost revenue is the right starting point, but some teams use the contribution margin per hour instead since not all revenue is directly at risk. Either approach is valid as long as it is consistent and documented.

Frequently Asked Questions

What is included in downtime cost per hour?: Three components: Lost Revenue per Hour (throughput times price, or contribution margin), Direct Labor Waste (loaded hourly cost of idled workers), and Scrap and Restart Cost (material dumped at shutdown, rework, and restart energy or time). In the example, $4,500 revenue plus $600 labor equals $5,100 per hour, with scrap and restart added once per event at $200 rather than per hour.
How do I calculate the cost of a specific downtime event?: Multiply the per-hour rate by event duration, then add the one-time scrap and restart cost. For a 2-hour stop at $5,100 per hour with $200 restart: ($5,100 x 2) + $200 = $10,400. Revenue and labor scale with hours, but scrap and restart is charged once because you dump material and reheat or re-thread the line a single time regardless of how long the stop lasts.
Should I use revenue or profit margin for downtime cost?: Either works if you stay consistent. Using full Lost Revenue per Hour, say $4,500, overstates true loss because variable material and energy costs are not incurred while down. Contribution margin per hour is more defensible for financial cases. Many teams present both: revenue for urgency and margin for the finance-approved number. Whichever you pick, document it so cross-line comparisons and ROI calculations stay valid.
Is downtime cost per hour high or worth acting on?: Context matters, but $5,100 per hour is significant. Multiply by expected annual downtime hours to judge exposure: 100 hours a year is $510,000. If a predictive maintenance or spares program costs well under that annual exposure, it pays back fast. As a rule, if per-event cost like the $10,400 two-hour event exceeds the cost of the fix or spare that prevents it, act.
How do I convert downtime cost to an annual figure?: Take the per-hour cost and multiply by total unplanned downtime hours per year, then add per-event scrap and restart times the number of events. At $5,100 per hour over 100 hours you get $510,000, plus if those came from 50 events at $200 restart each, add $10,000, for $520,000 annually. Pull downtime hours and event counts from your CMMS or line stop log.
What is the difference between downtime cost and lost production cost?: Lost production cost is just the throughput piece, the units or revenue you could not make, roughly the $4,500 per hour here. Downtime cost is broader, adding idle labor ($600 per hour) and scrap plus restart ($200 per event). Lost production understates the true hit because you still pay wages and waste material during a stop. Use full downtime cost for maintenance business cases, not lost production alone.