How to calculate savings on Machine Hour Rate

In this article I will explain how to calculate the machine hour rate you have saved by implementing some improvements in an operation of a machine.

Suppose the present output of a machine is 120 per hour. And you have done some improvement in the operation of a machine and increased the hourly output to 145, without increasing any input. So increase in the output per hour is 25 nos.

Machine minutes required per product before improvement = 60/120
= 0.5

Machine minutes required per product after improvement is = 60/145
= 0.4137

Machine minutes saved per product = 0.5 – 0.4137 = 0.0863

Suppose the demand of the product per month is 200000.

Machine minutes saved per month is 0.0863 x 200000 = 17260

Cost per hour of the machine is Rs 100.

Cost for one machine minute = 100/60 = Rs. 1.66

So total savings per month = 1.66 x 17260

Which is Rs. 28651/-

We are done with the calculation. Also its assumed that the machine is not idle due to no demand. If it is idle, cost for the idle time to be reduced from the calculated savings.

This calculation exactly same as we done for calculating manpower savings.

Also please have a look at the difference between 4 cycle times. Please click the link below.

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Thank you for reading.

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