Many small shops quote by feel: weight of material, a guess at machine hours, a margin, then a discount to win. That works until a job with a tight bore and a plating note goes out at the same price as a simple turned part. A should-cost estimate replaces the guess with a short, repeatable calculation.
The basic formula
A widely used way to break down machining cost is:
Part cost = Material + (Setup ÷ Batch) + (Machine rate × Cycle time) + Tool wear
Then add what the drawing asks for beyond machining: heat treatment, plating or coating, inspection and documents, packing and freight. Finally add overheads, a rejection allowance and your margin.
1. Material
Work from the stock size, not the finished weight. Include the cut-off and facing allowance for bar, and the drop and burn-off for plate.
- Material cost = stock weight × price per kg
- If the drawing does not state the grade and standard clearly, ask before you price. A change from EN8 to EN19, or from SS304 to SS316, changes the number a lot.
2. Setup, spread over the batch
Setup includes programming, fixture and tool setting, and first-piece inspection. It is spent once per batch, so:
- Setup per part = (setup hours × machine rate) ÷ batch quantity
This is why a 50-piece order and a 2,000-piece order of the same part should not carry the same price.
3. Machine rate × cycle time
Your machine hour rate should cover depreciation, interest, power, maintenance, floor space and, if you include it, the operator. Divide the yearly total by the hours you realistically run, not the theoretical maximum.
Cycle time is the time the tool is cutting plus loading, unloading and tool changes. Tighter tolerances and finer finishes add passes and slower feeds, so read the tolerance and finish callouts before you estimate time.
4. Tooling
Tool wear per part = cost of the insert or cutter ÷ parts per tool life. For hard materials or deep holes, this can be bigger than you expect.
5. The extras on the drawing
These are the lines most often missed:
- Heat treatment, case depth and hardness checks
- Plating, coating or blackening, and masking
- Grinding or honing for tight diameters
- Inspection: CMM time, gauges, dimensional reports, material certificates
- Special packing, rust protection and labelling
A worked example (illustrative numbers only)
The figures below are examples to show the method, not market rates. Use your own rates.
Part: EN8 shaft, turned on a CNC lathe, batch of 200 pieces.
- Material: bar Ø40 × 155 mm ≈ 1.53 kg. At an example price of ₹80/kg ≈ ₹122
- Setup: 1.5 hours at an example rate of ₹900/hour = ₹1,350 ÷ 200 parts ≈ ₹7
- Machining: 6-minute cycle at ₹900/hour = ₹90
- Tooling: ₹8
- Heat treatment: ₹24
- Inspection and packing: ₹10
Subtotal ≈ ₹261. Add an example 3% rejection allowance ≈ ₹269, then an example 12% margin ≈ ₹301 per part.
If the market price is ₹240, you now know where the gap is: material, cycle time or the extras. That is a far better conversation with the customer than a flat discount.
Should you quote every RFQ?
Quoting itself costs time. A Modern Machine Shop article on RFQs describes a shop owner who trained his team to filter certain RFQs before they reached the estimators. A quick should-cost helps here too: if a part needs a process you do not have, or the numbers do not work at the target price, decide early.
How SpecReview helps
SpecReview gives a should-cost estimate from your drawing or STEP model, line by line, along with the spec gaps and DFM risks that affect cost. Every line is tagged as coming from the spec, the geometry or an assumption, so you can replace the assumptions with your own rates before the quote goes out.