Figuring out machining cost per hour is a lot like balancing the books for a workshop: it’s a mix of hard numbers and hidden overheads. Anyone who’s ever quoted a job knows that underestimating—even by a few dollars—can eat into margins fast. Here’s how to break it down clearly and practically.
What is machining cost per hour?
In simple terms, machining cost per hour is the rate you charge for using a CNC machine, including everything from the machine itself to the operator running it. It’s not just about electricity or wages; it’s the total “true cost” of running that spindle for one hour.
How do you calculate machining cost per hour?
A reliable formula looks like this: Machining Cost per Hour=Fixed Costs + Variable Costs + Labour CostsTotal Productive Machine Hours\text{Machining Cost per Hour} = \frac{\text{Fixed Costs + Variable Costs + Labour Costs}}{\text{Total Productive Machine Hours}}Machining Cost per Hour=Total Productive Machine HoursFixed Costs + Variable Costs + Labour Costs
1. Fixed costs (machine ownership)
These are costs that stay the same regardless of how much work you run.
- Machine purchase price (spread over useful life, usually 7–10 years)
- Insurance
- Shop rent and admin overhead
Example: If a CNC mill costs $120,000 and you expect it to last 10 years with 2,000 productive hours per year, depreciation alone is: 120,000÷(10×2,000)=$6/hr120,000 \div (10 \times 2,000) = \$6/hr120,000÷(10×2,000)=$6/hr
2. Variable costs (running the machine)
These go up the more you use the machine.
- Electricity and coolant
- Tooling and consumables
- Maintenance and repairs
Example: If your shop spends $12,000 annually on tooling across 2,000 machine hours, that’s $6/hr just in tooling.
3. Labour costs
Operators are a big part of the equation. Factor in:
- Hourly wage
- Superannuation
- Training and compliance costs
Example: A machinist on $35/hr with benefits may cost closer to $45/hr in real terms.
4. Add a margin
Most shops add 20–40% to cover profit and unexpected downtime.
If your raw cost per hour is $70, adding 30% margin makes the charge-out rate $91/hr.
Why does this matter?
Getting this wrong leads to one of two problems:
- Charging too little, which bleeds money.
- Charging too much, which prices you out of work.
And in a trade where customers often get multiple quotes, the shops with sharp, transparent costing usually win the trust battle.
Real-world example: a small Aussie shop
A Brisbane-based precision shop recently shared that their CNC turning centre cost them $95/hr to run once they added everything in. Their biggest surprise? Tooling and idle time chewed up more than they expected. It shows why a back-of-the-envelope guess won’t cut it.
FAQ
How many hours should I assume a CNC machine runs per year?
A typical figure is 2,000 hours, but this depends on shifts and downtime. A 24/7 operation could triple that.
Should I include programming time?
Yes, especially for complex parts. Some shops bill programming separately, others roll it into the hourly rate.
Is electricity really a big factor?
For high-powered machines like 5-axis mills, yes. For smaller mills and lathes, it’s usually a minor percentage compared to tooling and labour.
Wrapping up
Calculating machining cost per hour isn’t glamorous, but it’s the difference between thriving and scraping by. By breaking it into fixed, variable, and labour costs, then adding a sensible margin, you’ll arrive at a figure that’s both competitive and sustainable. And remember: in today’s tight labour market, cost isn’t just about the spindle—it’s about people too. Shops struggling with rates often face the same issue highlighted in discussions about CNC machining: finding and keeping skilled machinists.
For a deeper dive into global costing practices, you might also look at this manufacturing cost analysis.