Machine Rate Calculator

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Machine Rate Calculator

Calculate the comprehensive hourly cost of operating industrial or agricultural machinery.

Ownership Details

Operating Details

Calculation Results

Hourly Ownership Cost:

Hourly Operating Cost:

Total Machine Hourly Rate (MHR):

Understanding Machine Hour Rate (MHR)

The Machine Hour Rate (MHR) is a critical financial metric used in manufacturing, construction, and agriculture to determine the total cost of operating a piece of equipment for one hour. Accurately calculating this rate is essential for project bidding, profitability analysis, and determining when to retire or replace equipment.

Key Components of the Machine Rate

A comprehensive machine rate is divided into three primary categories:

  • Fixed (Ownership) Costs: These costs occur regardless of whether the machine is running. They include depreciation (loss of value over time), interest on capital, property taxes, and insurance premiums.
  • Variable (Operating) Costs: These costs are directly proportional to the number of hours the machine is used. Key factors include fuel consumption, lubricants, tires or tracks, and routine maintenance/repairs.
  • Labor Costs: The hourly wage and benefits of the operator required to run the machine.

How the Calculation Works

The formula follows a logical progression of asset depreciation and operational overhead:

  1. Annual Depreciation: (Purchase Price – Salvage Value) / Economic Life.
  2. Annual ITI: Average Value ((Purchase Price + Salvage Value) / 2) multiplied by the ITI rate.
  3. Hourly Ownership: (Annual Depreciation + Annual ITI) / Annual Working Hours.
  4. Hourly Operating: (Fuel Price × Consumption) + (Annual Depreciation × Repair Factor / Annual Hours).
  5. Total Rate: Ownership + Operating + Operator Wage.

Practical Example

Imagine a bulldozer purchased for $150,000 with a salvage value of $30,000 after 10 years. If the machine runs 1,200 hours per year, the annual depreciation is $12,000. At an 8% ITI rate, interest costs add roughly $7,200 annually. When you add fuel ($67.50/hr), repairs ($6.00/hr), and an operator ($35/hr), the total rate helps a contractor realize they must bill at least $124.50 per hour just to break even on that specific asset.

function calculateMachineRate() { // Inputs var purchasePrice = parseFloat(document.getElementById('purchasePrice').value); var salvageValue = parseFloat(document.getElementById('salvageValue').value); var economicLife = parseFloat(document.getElementById('economicLife').value); var annualHours = parseFloat(document.getElementById('annualHours').value); var itiRate = parseFloat(document.getElementById('itiRate').value) / 100; var fuelConsumption = parseFloat(document.getElementById('fuelConsumption').value); var fuelPrice = parseFloat(document.getElementById('fuelPrice').value); var repairFactor = parseFloat(document.getElementById('repairFactor').value) / 100; var operatorWage = parseFloat(document.getElementById('operatorWage').value); // Validate inputs if (isNaN(purchasePrice) || isNaN(salvageValue) || isNaN(economicLife) || isNaN(annualHours) || annualHours <= 0) { alert("Please enter valid positive numbers for all fields."); return; } // Ownership Cost Calculation var annualDepreciation = (purchasePrice – salvageValue) / economicLife; var averageValue = (purchasePrice + salvageValue) / 2; var annualITI = averageValue * itiRate; var hourlyOwnership = (annualDepreciation + annualITI) / annualHours; // Operating Cost Calculation var hourlyFuel = fuelConsumption * fuelPrice; var hourlyRepair = (annualDepreciation * repairFactor) / annualHours; var hourlyOperating = hourlyFuel + hourlyRepair; // Total Rate var totalMHR = hourlyOwnership + hourlyOperating + operatorWage; // Display Results document.getElementById('resOwnershipCost').innerHTML = "$" + hourlyOwnership.toFixed(2); document.getElementById('resOperatingCost').innerHTML = "$" + (hourlyOperating + operatorWage).toFixed(2); document.getElementById('resTotalRate').innerHTML = "$" + totalMHR.toFixed(2) + " / hr"; document.getElementById('machineRateResult').style.display = 'block'; }

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