Work out machine hour rate instantly with clear inputs, formula shown and shareable results.
The machine hour rate absorbs all costs of running a machine centre over its productive hours: depreciation, space, insurance and supervision as fixed cost, power, consumables and maintenance as variable, plus the operator. Productive hours must exclude downtime and setup, or the rate will under-recover.
Machine hour rate
Rate = annual fixed cost / productive hours + annual variable cost / productive hours + operator rate
Fixed cost per hour is inversely proportional to hours. Assuming 4000 hours and achieving 2500 leaves 37% of fixed cost unrecovered, which shows up as an unexplained overhead variance.
Yes if the machine is occupied. Setup consumes capacity exactly as production does, which is why setup reduction improves recovery as well as output.