The Machine Hour Rate (MHR) is a critical metric in cost accounting and manufacturing management. It represents the total cost incurred to operate a specific machine for one hour. Accurately calculating this rate is essential for determining the production cost of goods, setting competitive prices, and evaluating the efficiency of machinery investments.
This calculator provides a breakdown of both fixed (standing) and variable (running) charges to give you a precise hourly operational cost.
Components of Machine Hour Rate
To calculate the MHR accurately, costs are generally divided into two categories:
Standing Charges (Fixed Costs): These are expenses that remain constant regardless of whether the machine is running or idle. Examples include rent for the factory floor, insurance premiums, supervisor salaries, and general lighting. These are usually calculated annually and then divided by the total effective working hours.
Running Charges (Variable Costs): These costs are incurred only when the machine is operational. They include power or fuel consumption, depreciation (wear and tear), and specific repair and maintenance costs directly tied to usage.
The Calculation Formula
The standard formula used in cost accounting is:
Machine Hour Rate = (Total Annual Fixed Costs / Annual Working Hours) + Variable Costs per Hour
How to Use This Calculator
To get an accurate result, ensure you have the following data points from your accounting records or machine manual:
Machine Cost & Life: Enter the purchase price and the estimated useful life in years. This is used to calculate the hourly depreciation expense.
Annual Hours: The total number of hours the machine is expected to be productive in a year (Total hours minus maintenance downtime).
Standing Charges: Sum up all annual fixed overheads allocated to this machine.
Power Consumption: Check the machine's technical specifications for energy usage per hour and multiply by your local electricity rate.
Why is MHR Important?
Calculating the Machine Hour Rate is vital for:
Overhead Absorption: Allocating factory overheads to specific products based on the time they spend on a machine.
Pricing Decisions: Ensuring that the sale price of a product covers the cost of machinery usage.
Cost Control: Identifying if power consumption or maintenance costs are becoming excessive compared to industry standards.
function calculateMHR() {
// Retrieve inputs
var cost = document.getElementById('machineCost').value;
var scrap = document.getElementById('scrapValue').value;
var lifeYears = document.getElementById('lifeYears').value;
var annualHours = document.getElementById('annualHours').value;
var standingCharges = document.getElementById('standingCharges').value;
var repairCharges = document.getElementById('repairCharges').value;
var powerUnits = document.getElementById('powerUnits').value;
var unitRate = document.getElementById('unitRate').value;
// Basic Validation
if (cost === "" || lifeYears === "" || annualHours === "") {
alert("Please fill in at least the Machine Cost, Useful Life, and Annual Working Hours to calculate depreciation.");
return;
}
// Parse Floats
cost = parseFloat(cost) || 0;
scrap = parseFloat(scrap) || 0;
lifeYears = parseFloat(lifeYears) || 1; // Avoid division by zero
annualHours = parseFloat(annualHours) || 1; // Avoid division by zero
standingCharges = parseFloat(standingCharges) || 0;
repairCharges = parseFloat(repairCharges) || 0;
powerUnits = parseFloat(powerUnits) || 0;
unitRate = parseFloat(unitRate) || 0;
// Calculations
// 1. Depreciation per hour = (Cost – Scrap) / (Life in Years * Annual Hours)
// Alternatively: (Cost – Scrap) / Total Life Hours
var totalLifeHours = lifeYears * annualHours;
var depreciationPerHour = (cost – scrap) / totalLifeHours;
// 2. Standing Charges per hour
var standingPerHour = standingCharges / annualHours;
// 3. Repair & Maintenance per hour
var repairsPerHour = repairCharges / annualHours;
// 4. Power Cost per hour
var powerCostPerHour = powerUnits * unitRate;
// Total MHR
var totalMHR = standingPerHour + depreciationPerHour + repairsPerHour + powerCostPerHour;
// Display Results with 2 decimal places
document.getElementById('resStanding').innerHTML = standingPerHour.toFixed(2);
document.getElementById('resDepreciation').innerHTML = depreciationPerHour.toFixed(2);
document.getElementById('resRepairs').innerHTML = repairsPerHour.toFixed(2);
document.getElementById('resPower').innerHTML = powerCostPerHour.toFixed(2);
document.getElementById('resTotal').innerHTML = totalMHR.toFixed(2);
// Show result area
document.getElementById('result-area').style.display = "block";
// Scroll to results
document.getElementById('result-area').scrollIntoView({behavior: "smooth"});
}