Machine Hourly Cost

Machine hourly Cost is being derived from two components. They are explained below:



  • Fixed Cost: These cost are fixed in nature and take place on a yearly basis irrespective of whether the machine is running or not. They are mainly based on the capital cost of the machine and hence are calculated on the on-road price of the machine. They are given below:


    1. Investment Cost: Machines consume capital and this capital is assumed to be in bank. This capital would have given us some rate of interest. In India, banks give 8-10% on Fixed deposits and 11-15% on loans. Thus one should calculate the rate of interest at 15% assuming that we are taking a loan from the bank and purchasing the equipment.
    2. Depreciation Cost: Machines and technology are assumed to become obselete in a certain span of time. Also when a machine is working some wear and tear is bound to take place due to its usage. Other factors include physical decay, accidental depreciation, deferred maintainence and neglect and reduction in efficiency of the machine. They can be also be calculated on a variable cost if the machine is running for a long spell continuiosly. In that case, the deferred maintainence and neglect,wear and tear cost will offset the cost of obsolence.
    3. Labour Cost: To run the machine, operators/salaried persons are required. This salaried persons have to be paid whether the machine is running or not. Hence they come under fixed cost.
    4. Miscelleneous cost: There are othercost like storage space required, acidental insurance purchased on the machine. Though, they are negligible in the long term, they must be considered.


  • Variable Cost: These are the running cost of the machine. They are given below:


    1. Fuel Cost:Diesel Cost of diesel/electrical power consumed on an hourly basis.
    2. Lubricants cost: Machine require periodic maintainence on a regular basis, Certain oils and filters have to replaced on a regular basis. Based on this cost at certain intervals say at 250 hours, we interpolate on an hourly basis. For example if my maintainece cost is Rs2500 for 250 hours then my hourly cost of lubricants is Rs10.
    3. Service and mintainence cost: Inspite of the periodic maintainence, some machine breakdown will take place. As a result, maintainence people from the machine manufacturers will have to called. Also some materials may have to replaced. While there is no fixed methodology to calculate its cost, it would be better to include some estimate costs at certain intervals of time and then calculate on an hourly basis.
    4. Overheads: These are miscelleneouscost which are negligible like tea/coffee allowance to the operators, uniforms and safety equipment to the operators, etc.