Precision CNC cost breakdown with volume pricing tiers
Build per-part margins with setup amortization, tooling life, and utilization targets; output tiered pricing.
1) Understanding Fixed vs Variable Costs
Accurate CNC pricing requires distinguishing between fixed costs (amortized across batch size) and variable costs (incurred per part).
Fixed Costs (One-Time Setup)
- Fixture & workholding setup: 15-45 minutes depending on complexity
- Program loading & verification: 10-20 minutes for CAM setup and toolpath validation
- Tool setup & presetting: 5-15 minutes per tool (offset measurement, runout check)
- First article inspection: 10-30 minutes to verify dimensions and surface finish
- Machine warm-up: 5-10 minutes for thermal stability on precision work
Variable Costs (Per Part)
- Spindle time: Actual machining time per operation (roughing, finishing, drilling)
- Tool changes: 3-8 seconds per tool change × number of operations
- Tooling wear: $0.50-$15 per part depending on material hardness and tool life
- Deburring & cleaning: 2-10 minutes manual work per part
- Material cost: Stock size × material rate with 10-20% waste allowance
- Secondary operations: Tapping, heat treatment, surface finishing if required
Cost Formula
2) Setup Cost Amortization Across Batch Sizes
The dramatic cost reduction from batch manufacturing comes from spreading fixed setup costs across more units.
| Batch Quantity | Setup Cost per Part | Variable Cost | Total Unit Cost | Setup % of Total |
|---|---|---|---|---|
| 1 piece | $300.00 | $15.00 | $315.00 | 95.2% |
| 10 pieces | $30.00 | $15.00 | $45.00 | 66.7% |
| 50 pieces | $6.00 | $15.00 | $21.00 | 28.6% |
| 100 pieces | $3.00 | $15.00 | $18.00 | 16.7% |
| 500 pieces | $0.60 | $15.00 | $15.60 | 3.8% |
| 1,000 pieces | $0.30 | $15.00 | $15.30 | 2.0% |
Key Insights from the Table
- Dramatic drop from 1→10 units: Cost falls 86% ($315 → $45) as setup spreads across 10 parts
- 10→100 pieces: 60% reduction ($45 → $18) as setup becomes less dominant
- 100+ pieces: Cost stabilizes near variable cost floor ($15.30 at 1,000 units)
- Break-even analysis: At $300 setup + $15 variable, profitable pricing requires minimum 10-20 pieces for most shops
3) Tooling Life Cycle & Wear Cost Calculation
Tooling costs vary dramatically by material hardness, cutting parameters, and tool quality. Accurate tooling cost per part is critical for sustainable pricing.
| Material Type | Tool Type | Tool Cost | Tool Life (parts) | Cost per Part |
|---|---|---|---|---|
| Aluminum 6061 | Carbide end mill | $45 | 500-800 | $0.06-$0.09 |
| Mild Steel 1018 | Coated carbide | $65 | 200-400 | $0.16-$0.33 |
| Stainless 304 | Coated carbide | $75 | 100-200 | $0.38-$0.75 |
| Titanium Ti-6Al-4V | Premium carbide | $120 | 40-80 | $1.50-$3.00 |
| Tool Steel D2 | Premium coated | $95 | 60-120 | $0.79-$1.58 |
| Inconel 718 | Ceramic insert | $180 | 20-40 | $4.50-$9.00 |
- Tool life factors: Cutting speed (SFM), feed rate, depth of cut, coolant quality, and tool coating type all affect wear rate.
- Multi-tool operations: A complex part may use 4-8 different tools (roughing end mill, finishing mill, drills, taps). Sum wear cost for all tools.
- Tool reconditioning: Some tools can be resharpened 2-4 times at 30-40% of new cost, reducing effective per-part cost.
- Insert vs solid tools: Indexable inserts have lower per-edge cost but higher initial investment. Analyze based on production volume.
- Track tool life: Use CNC control software to log tool usage and predict replacement timing to avoid scrapped parts from worn tools.
4) Machine Utilization & Hourly Rate Optimization
Machine hourly rate must cover equipment depreciation, maintenance, energy, and overhead while achieving target utilization rates.
Machine Hourly Rate Components
| Utilization Target | Annual Hours | Required Rate | Scenario |
|---|---|---|---|
| 50% (1,040 hrs) | 1,040 | $86.50/hr | Low utilization – need higher rate or more work |
| 65% (1,352 hrs) | 1,352 | $66.50/hr | Typical job shop target |
| 80% (1,664 hrs) | 1,664 | $54.00/hr | High efficiency – competitive pricing possible |
| 90% (1,872 hrs) | 1,872 | $48.00/hr | Production environment – maximum efficiency |
- Opportunity cost: When utilization exceeds 85%, consider premium pricing for rush jobs or investing in additional capacity.
- Multi-shift operation: Second shift can reduce hourly rate by 30-40% through depreciation spreading, but requires labor premium (10-15%).
- Machine capability premium: 5-axis or high-speed machining centers can command 20-40% higher rates due to capability advantage.
- Benchmark rates: Industry standard CNC hourly rates range $45-$95/hr depending on region, machine type, and shop specialization.
5) Detailed Case Studies by Complexity
Real-world examples showing cost breakdown and pricing strategy across different part complexities.
📊 Case 1: Simple Mounting Bracket (Low Complexity)
Part description: L-bracket with 4 mounting holes
Material: Aluminum 6061, 10mm × 80mm × 120mm stock
Operations: Face mill, drill 4× Ø8mm, chamfer edges
Batch size: 50 pieces
Setup time: 45 minutes ($67.50 total)
Cycle time per part: 4.5 minutes
Material cost: $3.20 per part (stock + 15% waste)
Machine time: 4.5 min × $54/hr = $4.05
Tooling wear: $0.15 per part
Setup per part: $67.50 ÷ 50 = $1.35
Key insight: Simple geometry and soft aluminum allow fast cycle time. At 50 pieces, setup cost is only 15% of total. Profitable even at 35% margin.
📊 Case 2: Precision Housing (Medium Complexity)
Part description: Electronics enclosure with internal pockets
Material: 6061-T6 aluminum, 25mm × 100mm × 150mm
Operations: 3-axis milling, roughing + finishing, 12× tapped holes M4
Batch size: 25 pieces
Setup time: 75 minutes ($90 total)
Cycle time per part: 28 minutes
Material cost: $18.50 per part
Machine time: 28 min × $54/hr = $25.20
Tooling wear: $1.85 per part (4 tools)
Setup per part: $90 ÷ 25 = $3.60
Key insight: Longer cycle time (28 min) and complex geometry justify 42% margin. Tapping operations add significant time. Consider volume discount at 100+ pieces.
📊 Case 3: Precision Shaft (High Complexity)
Part description: Multi-diameter turned shaft with ±0.005mm tolerance
Material: 4140 steel, Ø50mm × 200mm bar stock, heat-treated
Operations: CNC turning, OD grinding, centerless grinding
Batch size: 10 pieces (prototype run)
Setup time: 120 minutes ($150 total + $50 grinding setup)
Cycle time per part: 45 min lathe + 18 min grinding
Material cost: $32.00 per part (heat-treated stock)
Machine time: 45 min × $54/hr + 18 min × $72/hr = $62.10
Tooling wear: $4.20 per part (carbide inserts + grinding wheel)
Setup per part: $200 ÷ 10 = $20.00
Key insight: Low volume (10 pcs) means setup is 17% of total cost. Tight tolerances require precision grinding. 55% margin justified by complexity, risk, and small batch. At 100+ pieces, cost drops to $102/part.
6) Volume Pricing Strategy & Tier Structure
Structure tiered pricing to incentivize larger orders while maintaining profitability at all volume levels.
| Pricing Tier | Quantity Range | Unit Price | Discount % | Target Margin |
|---|---|---|---|---|
| Prototype | 1-10 pieces | $45.00 | — | 45-55% |
| Small Batch | 11-50 pieces | $36.00 | 20% | 35-42% |
| Standard | 51-200 pieces | $28.80 | 36% | 28-35% |
| Production | 201-1,000 pieces | $23.40 | 48% | 22-28% |
| Volume | 1,000+ pieces | $19.80 | 56% | 18-22% |
Pricing Strategy Guidelines
- Prototype tier (1-10): High margin (45-55%) compensates for setup dominance and risk. Premium for engineering support and quick turnaround.
- Small batch (11-50): Setup cost amortizes significantly. Offer 20% discount to incentivize larger orders while maintaining healthy margin.
- Standard (51-200): Sweet spot for most job shops. 28-35% margin balances competitiveness with profitability.
- Production (201-1,000): Lower margin (22-28%) acceptable due to volume. Setup cost negligible, focus on machine efficiency.
- Volume (1,000+): Strategic pricing at 18-22% margin. Ensure capacity, tooling investment, and quality systems can support volume.
- Customer segmentation: Strategic OEM accounts may get 5-8% additional discount. New customers pay list price until proven reliability.
- Contract pricing: Annual agreements with volume commitments can justify 10-15% discount in exchange for predictable revenue.
- Rush pricing: Add 25-40% premium for 24-48 hour turnaround. Add 15% for 1-week rush on standard 2-3 week lead time.
- Minimum order value: Consider $500-$1,000 minimum to avoid unprofitable small orders consuming setup capacity.
7) Design for Manufacturability (DFM) Cost Optimization
Smart design choices can reduce CNC costs by 30-60% without compromising functionality. Collaborate with customers early in design phase.
✓ Standardize Material Sizes
Impact: Reduce material cost by 15-25% and minimize waste.
Best practice: Design parts to fit standard stock sizes (e.g., 25mm, 50mm, 100mm). Avoid custom bar diameters or plate thicknesses requiring special orders.
✓ Simplify Internal Corners
Impact: Reduce cycle time by 10-20% and eliminate secondary operations.
Best practice: Use radius corners (R3-R6mm) instead of sharp internal corners. Sharp corners require EDM or multiple tool passes, adding cost and time.
✓ Relax Tolerances Where Possible
Impact: Reduce machining time by 20-40% and lower scrap rate.
Best practice: Use ±0.1mm standard tolerance for non-critical features. Reserve ±0.025mm or tighter for mating surfaces only. Each tighter tolerance level adds 15-30% to cycle time.
✓ Minimize Deep Pockets & Thin Walls
Impact: Reduce tool wear cost by 30-50% and improve surface finish.
Best practice: Keep pocket depth ≤3× tool diameter. Maintain wall thickness ≥2× material thickness to avoid chatter and deflection. Deep pockets require multiple roughing passes and slow finishing speeds.
✓ Reduce Number of Setups
Impact: Save 15-45 minutes per setup, reduce tolerance stack-up errors.
Best practice: Design parts for single-side machining when possible. If multiple setups required, incorporate alignment features (dowel pins, reference faces) for repeatable positioning.
✓ Avoid Exotic Surface Finishes
Impact: Eliminate $50-$200 secondary operation cost per part.
Best practice: Specify "as-machined" finish (Ra 1.6-3.2 μm) unless functional requirement demands better. Polishing, lapping, and coating add significant cost and lead time.
DFM Cost Comparison Example
Original Design (Not Optimized)
- Custom material size: $22.00
- Sharp internal corners: +12 min cycle time
- ±0.025mm tolerance overall: +8 min grinding
- Deep pocket (6×Ø): +15 min extra passes
- Surface grinding finish: +$45 secondary op
Total Cost: $128.50 per part
Optimized Design (DFM Applied)
- Standard material size: $16.50 (25% savings)
- R4mm radius corners: -12 min cycle time
- ±0.1mm standard tolerance: -8 min grinding
- Shallow pocket (3×Ø): -15 min extra passes
- As-machined finish: $0 secondary op
Total Cost: $67.20 per part (48% reduction!)
8) Publishing Multi-Tier Quotes
Professional tiered quotes increase average order value by making volume discounts transparent and encouraging larger commitments.
Quote Presentation Best Practices
- Show all tiers: Display 3-5 quantity tiers even if customer requested only one quantity. This educates them on volume economics.
- Highlight sweet spot: Use visual emphasis (bold, color) on the tier with best margin:value ratio for your shop (typically 50-200 pieces).
- Include cost breakdown: Show material, setup, machining, and tooling separately. Transparency builds trust and justifies pricing.
- Add lead time by tier: Larger quantities need longer lead time. Be explicit: 1-10 pcs = 5 days, 100+ pcs = 3 weeks.
- Validity period: State quote valid for 30-60 days. Material prices fluctuate, protect yourself from commodity swings.
- Terms & conditions: Include payment terms (50% deposit, Net 30), tolerance standards (ISO 2768-m unless specified), and revision policy.
Sample Quote Table
| Quantity | Unit Price | Extended Total | Lead Time | Savings vs Prototype |
|---|---|---|---|---|
| 5 pieces | $45.00 | $225.00 | 5 days | — |
| 25 pieces ⭐ | $36.00 | $900.00 | 10 days | 20% |
| 100 pieces | $28.80 | $2,880.00 | 3 weeks | 36% |
| 500 pieces | $23.40 | $11,700.00 | 6 weeks | 48% |
Note: Prices include setup, material, machining, and standard deburring. Anodizing or special finishes quoted separately. Quote valid 45 days. Payment terms: 50% deposit, balance Net 30.