Machine shop hourly rate calculator.
Add up what one machine costs to own and run for a year, divide by the hours it actually cuts, then add your margin. The result is the least an hour on that machine can sell for, and the rate to quote it at.
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$131.26 an hour.
The example shop’s rate at a 20% margin: one new 3-axis mill at $120,000, one shift, 65% utilised. It costs $105.01 per spindle hour.
Example figures for a small CNC shop in Ontario or the US. Replace them with yours below.
Your numbers, one machine at a time.
Every field is per machine. Change what you know and leave the rest.
Cost per spindle hour
$105.01/ hr
What each billed hour has to bring in to cover the year, before any profit.
At a 20% margin
- Cost per spindle hour
- $105.01
- Margin
- +$26.25
- Shop rate
- $131.26 / hr
A 20% margin is a 25% markup on cost. The year costs $136,507, spread over 1,300 billed hours.
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| Cost | Per year | Per spindle hour | Share |
|---|---|---|---|
| Depreciation$120,000 over 7 years | $17,143 | $13.19 | 12.6% |
| Financing interest7.5% a year, paid monthly over the same years | $4,944 | $3.80 | 3.6% |
| Floor space200 sq ft at $12.00 a year | $2,400 | $1.85 | 1.8% |
| Power10 kW for 1,300 cutting hours at $0.14 / kWh | $1,820 | $1.40 | 1.3% |
| Tooling and maintenanceAs entered, per year | $12,000 | $9.23 | 8.8% |
| Operator, with burden$32.00 / hr plus 30%, for all 2,000 available hours | $83,200 | $64.00 | 60.9% |
| Overhead shareAs entered, per year | $15,000 | $11.54 | 11.0% |
| Cost per spindle hour2,000 available hours at 65% utilisation: 1,300 billed | $136,507 | $105.01 | 100.0% |
| Margin20% of the price | $34,127 | $26.25 | |
| Shop rate | $170,634 | $131.26 |
Use one currency throughout, CAD or USD; the arithmetic is the same. The starting figures are an example for one new 3-axis mill on one shift in a small shop, not survey data. Replace them with your own.
How the calculation works
Billed hours = available hours × utilisation. Yearly cost = machine cost ÷ years + average yearly loan interest (monthly payments over the same years) + floor space × rent + kW × electricity rate × billed hours + tooling and maintenance + wage × (1 + burden) × available hours + overhead. Cost per spindle hour = yearly cost ÷ billed hours. Shop rate = cost per spindle hour ÷ (1 − margin). Material, outside processes and resale value are not included.
Reading the result.
Cost per spindle hour is your floor
A quote below it loses money on every hour, however full the schedule is.
The shop rate prices machine time
Setup and cycle time on the quote, multiplied by this rate. Material and outside processes go on their own lines.
The breakdown shows what drives it
In the example it is the operator, at 61% of every hour. Change the line that matters most first.
Common mistakes.
Utilisation set too high
Setups, first-article checks, waiting on material, breakdowns and an empty queue all eat into staffed hours. At 90% the example’s cost falls from $105.01 to $76.23 an hour, which only holds if the machine really cuts 1,800 hours a year.
Forgetting burden
An operator costs more than their wage (payroll taxes, benefits, paid time off) and is paid for every staffed hour, cutting or not. Leaving out the example’s 30% burden understates the cost by $14.77 an hour.
Treating markup as margin
Adding 20% to cost gives a margin of about 16.7%, not 20%. Enter the margin you want as a share of the price.
Questions about shop rates.
Should every machine have its own rate?
Usually, yes. A five-axis mill or a Swiss lathe with a bar feeder costs more an hour to own than a manual-load three-axis mill, and blending them into one shop rate overprices the simple work and underprices the hard work. Run the calculator once per machine, or once per class of machine.
Does the shop rate include material?
No. It covers machine time only: owning the machine, its space and power, tooling, the operator and a share of overhead. Price material, heat treat, plating and other outside processes on their own lines.
What utilisation should I use?
Your own, measured: last year’s billed spindle hours divided by the hours the machine was staffed. If you don’t track it, pick a number you would defend and check it against a quarter of job records.
Is margin the same as markup?
No. Margin is profit as a share of the price; markup is profit as a share of cost. A 20% markup gives a margin of about 16.7%. This calculator takes margin and shows the matching markup beside the result.
More on pricing a job: quoting guides.
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