machine hour rate

Cost per hour? To use the machine?

Just an Engineer covered many of the issues, and Hole in the Snow covered the easiest way around your problem. However there are just a few more issues to add to your computation. There is the issue of the tax write off that will effect your annual bottom line. Depreciation, and salvage value of the machine after it has expended it's useful life. Then there is the interesting stuff, like selling the machine to a shell company that will write off the rebuilding costs and resell the same piece of equipment back to your original company, and the depreciation and operating cost begin again! Have a nice 4th!

Tmf

Two differnt methods

Firstly, Divide machine cost by total hours available in machine life. This gives machine cost per hour of its life. (If your machine cost $100,000 and will run for 10 years at 100 hours per week and 50 weeks per year then you need to recover $2 for every hour the machine can run.)

Determine labour to attend and look after the machine per hour. (Number of operators times the hourly salary.)

Determine the "overheads" cost of running your business per hour. (Cost of land rates, water connection, management salary and so on) Then factor this for how much this machine represents as a proportion of your turnover. (If you have four machines and it costs $100,000 per year for those costs, then you need to recover $25,000 per machine per year.) [If we stick with 100 hours per week and 50 working weeks, then each machine needs to recover $5 per hour.]

Determine your "other costs" like maintenance materials and so on and add that.

Add all these together and you have an indication of what you need to recover per hour for the machine.

Second method:

Determine your monthly interest bill for the purchase cost of the machine. Divide that by the number of hours you will be working the machine and if you have not employed anyone additional, then that indicates how much you need to recover for the machine to cover its own costs.

Note: The above is a VERY short review of the types of things you need to understand. It does not deal with business profit, and does not make allowances for non-productive hours when the machine is idle.

Follow these steps:

1. Get friendly with one of the Bean counters in your company (they probably don't have any friends so they will welcome anyone who talks to them).

2. Ask them if they would like a cup of warm milk. Complement them on their nice sweater.

3. Ask them your question and pretend to listen to their answer.

4. Ask them to write it out for you as you find it really interesting but since you are only an engineer you don't really understand all this "hourly rate" stuff.

5. Give him/her their inhaler and leave as quickly as possible.