Rate Structure
Industrial cost accounting employs a standardized rate to allocate the operating expenses of manufacturing equipment to specific production runs. For electronics contract manufacturers, the machine hour billing tariff is the hourly monetary charge applied to a customer for the utilization of an SMT line or individual machine. This rate incorporates the equipment purchase depreciation and routine maintenance.
Cost Calculation
Determining the cost of a printed circuit board assembly batch requires combining material costs with machine utilization expenses. The machine hour billing tariff is multiplied by the actual run time of the job to calculate the processing cost. If a job runs slowly due to feeder issues or vision errors, the total cost billed to the project increases accordingly.
This hourly rate forces production managers to maximize line efficiency and minimize setup downtime to keep their pricing competitive.
Financial Management
Equipment amortization schedules directly influence the tariff rates set by the finance department. Newer, high speed machines have a higher depreciation cost and thus require a higher tariff to recover the capital investment. This makes it necessary to run high-value equipment on multi-shift schedules to distribute the fixed capital costs over a larger volume of finished boards.