Machine Overhead Percentage Given Machining And Operating Rate Calculator

Formula Used:

\[ Machine\ Overhead\ Percentage = \left( \frac{Machining\ and\ Operating\ Rate - \left( Wage\ Rate \times \frac{100 + Operator's\ Overhead\ Percentage}{100} \right)}{Depreciation\ Rate} \times 100 \right) - 100 \]

Machining and Operating Rate (M):

currency/unit time

Wage Rate (Wo):

currency/unit time

Operator's Overhead Percentage (%opt):

Depreciation Rate (Mt):

currency/unit time

Machine Overhead Percentage:

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1. What is Machine Overhead Percentage?

Machine Overhead Percentage is the percentage of Capital spent on a machine, regardless of any work it performs. It represents the indirect costs associated with machine ownership and operation beyond direct labor costs.

2. How Does the Calculator Work?

The calculator uses the formula:

\[ Machine\ Overhead\ Percentage = \left( \frac{M - \left( Wo \times \frac{100 + \%opt}{100} \right)}{Mt} \times 100 \right) - 100 \]

Where:

\( M \) — Machining and Operating Rate (currency/unit time)
\( Wo \) — Wage Rate (currency/unit time)
\( \%opt \) — Operator's Overhead Percentage (%)
\( Mt \) — Depreciation Rate (currency/unit time)

Explanation: This formula calculates the percentage of machine-related overhead costs by comparing the total operating rate with the direct labor costs and depreciation.

3. Importance of Machine Overhead Calculation

Details: Accurate machine overhead calculation is crucial for determining true production costs, setting appropriate pricing, and making informed decisions about equipment investment and utilization.

4. Using the Calculator

Tips: Enter all values in appropriate currency units per time unit. Ensure all values are positive numbers. The operator's overhead percentage should be entered as a percentage value (e.g., 20 for 20%).

5. Frequently Asked Questions (FAQ)

Q1: What is included in machine overhead costs?
A: Machine overhead includes maintenance, utilities, space rental, insurance, and other indirect costs associated with machine operation beyond direct labor and depreciation.

Q2: How is depreciation rate calculated?
A: Depreciation rate is typically calculated as the machine's initial cost divided by its estimated productive life, expressed in currency per time unit.

Q3: Why is operator's overhead percentage important?
A: Operator's overhead percentage accounts for indirect costs associated with the operator (benefits, training, supervision) that are not included in the direct wage rate.

Q4: What is a typical range for machine overhead percentage?
A: Machine overhead percentage varies by industry and equipment type, but typically ranges from 20% to 100% of the direct machine costs.

Q5: How often should machine overhead be recalculated?
A: Machine overhead should be recalculated periodically (quarterly or annually) to account for changes in costs, utilization rates, and equipment value.