CNC Machine Hourly Rate Calculation Guide

Understanding CNC Machine Hourly Rate

The CNC machine hourly rate is the cost of running a machine per hour, including fixed costs (machine ownership, depreciation), variable costs (electricity, tooling), and labor. Accurately calculating this rate helps set competitive pricing for jobs while ensuring profitability.

Key Components of the Hourly Rate

A. Fixed Costs (Overhead)

These costs remain constant regardless of how many parts are produced.

• Machine Depreciation: Initial machine cost divided by its expected lifespan.
• Rent/Mortgage: Cost of shop space, allocated to the machine proportionally.
• Insurance & Taxes: Business insurance and property taxes.
• Software & Maintenance: CAM software licenses, routine servicing.

B. Variable Costs

These costs fluctuate depending on usage.

• Electricity: Power consumption of the machine.
• Tooling Costs: Cutting tools, inserts, and replacement parts.
• Coolant & Lubricants: Fluids needed to operate the machine efficiently.

C. Labor Costs

• Operator Wages: Hourly wage of the machine operator.
• Setup Time: Cost of preparation before actual machining.
• Supervision & Programming: Time spent on programming and oversight.

Step-by-Step Calculation of CNC Hourly Rate

Step 1: Calculate Fixed Costs

Use this formula:

Annual Fixed Cost = Sum (Depreciation, Rent, Insurance, Software, Maintenance)

Divide by the total annual working hours:

Fixed Cost per Hour = Annual Fixed Cost / Total Machine Operating Hours per Year

Step 2: Calculate Variable Costs per Hour

Sum up electricity, tooling, and fluid costs:

Variable Cost per Hour = Total Variable Cost per Year / Total Machine Operating Hours per Year

Step 3: Calculate Labor Costs per Hour

Include operator wages and supervision:

Labor Cost per Hour = (Operator Wage + Supervisor Time) x Hours Worked

Step 4: Determine Total Hourly Rate

Sum up all costs:

Total Hourly Rate = Fixed Costs + Variable Costs + Labor Costs

Add a profit margin (e.g., 20-50%) to ensure profitability.

Final Billing Rate = Total Hourly Rate * (1 + Profit Percentage)

Pro Tips for Accurate Calculation

• Track Machine Usage: Keep logs of actual machine hours for realistic cost distribution.
• Optimize Tool Life: Use high-quality tools to reduce frequent replacements.
• Consider Downtime: Factor in non-productive hours to avoid underpricing.
• Review Annually: Update your rates to reflect changing costs and inflation.
• Compare Market Rates: Ensure your rate is competitive but profitable.

By following this guide, you can establish a precise and competitive CNC machine hourly rate, ensuring profitability while remaining competitive in the industry. Here is the sample data for better understanding.

Calculation for a CNC Machine Hourly Rate

Initial information which you need:

• Machine Purchase Cost: $100,000
• Expected Lifespan: 10 years
• Annual Rent & Utilities: $12,000
• Annual Insurance & Taxes: $3,000
• Annual Software & Maintenance: $5,000
• Annual Operating Hours: 2,000 hours
• Electricity Cost per Year: $6,000
• Tooling & Consumables per Year: $4,000
• Operator Wage: $25 per hour
• Supervisor Wage: $40 per hour (1 hour of supervision for every 10 hours of operation)
• Profit Margin: 30%

Let's go step by step and calculate the hourly rate.

Step 1: Calculate Fixed Costs

Machine Depreciation per Year = $100,000 / 10 = $10,000
Total Fixed Cost per Year = $10,000 + $12,000 + $3,000 + $5,000 = $30,000
Fixed Cost per Hour = $30,000 / 2,000 = $15/hour

Step 2: Calculate Variable Costs

Total Variable Cost per Year = $6,000 + $4,000 = $10,000
Variable Cost per Hour = $10,000 / 2,000 = $5/hour

Step 3: Calculate Labor Costs

Supervisor Cost per Hour = ($40 / 10) = $4/hour
Labor Cost per Hour = $25 + $4 = $29/hour

Step 4: Determine Total Hourly Rate

Total Hourly Rate = $15 + $5 + $29 = $49/hour
Final Billing Rate = $49 x (1 + 0.30) = $63.70/hour

Final CNC Machine Hourly Rate:

$63.70 per hour (including a 30% profit margin)
 

About MDCplus

Our key features are real-time machine monitoring for swift issue resolution, power consumption tracking to promote sustainability, computerized maintenance management to reduce downtime, and vibration diagnostics for predictive maintenance. MDCplus's solutions are tailored for diverse industries, including aerospace, automotive, precision machining, and heavy industry. By delivering actionable insights and fostering seamless integration, we empower manufacturers to boost Overall Equipment Effectiveness (OEE), reduce operational costs, and achieve sustainable growth along with future planning.