what is machine hour rate and how do you compute costs

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Accepted Answer

Machine hour rate is the cost incurred per hour of machine usage. It is computed by dividing total machine costs by total machine hours.

Machine hour rate is used to allocate overhead costs to products or services based on the amount of machine usage.
Total machine costs include all expenses related to the machine, such as depreciation, maintenance, and repairs.
Total machine hours are the number of hours the machine is expected to be used during a given period.
To compute the machine hour rate, divide total machine costs by total machine hours.
For example, if total machine costs are $10,000 and total machine hours are 2,000, the machine hour rate would be $5 per hour.

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