Calculation Methodology & Assumptions
Transparent formulas, data sources, and assumptions behind our calculators
Our Methodology Principles
- ✓ Industry Standards: Based on ASME, ISO, and industry best practices
- ✓ Peer-Reviewed: Formulas validated against academic and industry research where possible
- ✓ Real-World Calibrated: Intended to be checked and tuned against your own shop data
- ✓ Regularly Reviewed: Revisited as equipment, energy, and material benchmarks evolve
- ✓ Transparent: All assumptions and limitations clearly documented on this page
How to validate these formulas with your own data
Step 1: Collect a small baseline
- Pick 3–10 representative jobs and record actual time, cost, and material usage.
- Use machine logs, ERP data, or simple stopwatches and job tickets.
- Note any special factors (unusual materials, rework, second operations).
Step 2: Recreate those jobs in the calculators
- Enter the same dimensions, materials, and batch sizes you used in production.
- Use your actual shop rates for labor, machine time, energy, and gas – not generic examples.
- Compare the modeled outputs (time and cost) against what you actually measured.
Step 3: Calibrate the sensitive inputs
- If real jobs are consistently slower than modeled, reduce cutting speeds or increase setup time inputs.
- If costs are off, double-check material prices, hourly rates, and overhead assumptions first.
- Use your own typical utilization, scrap rate, and auxiliary power instead of leaving defaults unchanged.
What kind of match to expect
- Roughly ±5–10% difference between modeled and actual results is excellent for planning.
- ±10–20% is common before detailed calibration and usually fine for early quoting.
- If differences are regularly above ~20%, revisit inputs, local rates, and key assumptions before relying on the numbers.
Most of the remaining error typically comes from shop-specific factors such as exact cutting parameters, operator technique, material price volatility, and how you allocate overhead. The calculators are designed to make those drivers visible so you can tune them to match your own reality.
Core Formula
Total Cost = Material Cost + Energy Cost + Labor Cost + Gas Cost + Depreciation + Overhead
Variable Definitions
Material Cost
Sheet price × (Part area + Kerf waste) / Sheet area
Unit: USD
Energy Cost
Machine power (kW) × Cutting time (h) × Electricity rate ($/kWh)
Unit: USD
Labor Cost
Operator hourly rate × (Cutting time + Setup time)
Unit: USD
Gas Cost
Gas consumption rate × Cutting time × Gas price
Unit: USD
Depreciation
Machine cost / (Expected lifetime hours) × Cutting time
Unit: USD
Overhead
15-25% of direct costs (facility, utilities, admin)
Unit: %
Key Assumptions
- •Machine operates at rated power during cutting (actual may vary 70-100%)
- •Kerf width averages 0.1-0.3mm depending on material and thickness
- •Pierce time: 0.5-2 seconds per hole depending on thickness
- •Setup time: 5-15 minutes per job (material loading, program setup)
- •Gas consumption: 10-30 L/min for assist gas (varies by process)
- •Machine efficiency: 90-95% (accounts for downtime, maintenance)
Data Sources & References
Material properties
ASM International Handbook, Vol. 2
Energy consumption
ISO 14955-1:2017 Machine tools — Environmental evaluation
Industry benchmarks
Fabricators & Manufacturers Association (FMA) Survey 2023
Applicable Scenarios
- ✓Sheet metal cutting (0.5-50mm thickness)
- ✓Stainless steel, mild steel, aluminum, copper, brass
- ✓CO2 and fiber laser systems
- ✓Single parts and batch production
Limitations & Exclusions
- âš Does not include post-processing (deburring, finishing)
- âš Assumes standard material grades and quality
- âš Does not account for material price fluctuations
- âš Setup time is estimated average (varies by shop)
Core Formula
Total Cost = Machine Cost + Material Cost + Tooling Cost + Setup Cost + Overhead
Variable Definitions
Machine Cost
Machine hourly rate × Machining time
Unit: USD
Material Cost
Material price per unit × Material volume/weight
Unit: USD
Tooling Cost
Tool cost / Tool lifetime × Number of operations
Unit: USD
Setup Cost
Setup time × Machine hourly rate
Unit: USD
Overhead
15-20% of direct costs
Unit: %
Key Assumptions
- •Machine hourly rate includes depreciation, maintenance, and facility costs
- •Tool life based on manufacturer specifications and material hardness
- •Machining time calculated from feed rates and cutting speeds
- •Setup time: 30-120 minutes depending on complexity
- •Material utilization: 40-70% (remaining is waste/chips)
Data Sources & References
Machining parameters
Machinery's Handbook, 31st Edition
Machine rates
NTMA (National Tooling & Machining Association) Benchmarks
Applicable Scenarios
- ✓Milling, turning, drilling operations
- ✓Aluminum, steel, titanium, plastics
- ✓3-axis and multi-axis machining
- ✓Prototype and production runs
Limitations & Exclusions
- âš Does not include CAM programming time
- âš Assumes standard tooling (special tools add cost)
- âš Does not account for inspection and quality control
- âš Complex geometries may require longer setup
Core Formula
Cash Flow = Revenue - (Operating Costs + Debt Service); Payback occurs when cumulative cash flow ≥ 0
Variable Definitions
Total Investment
Equipment purchase price + installation expenses
Unit: USD
Financed Amount
Total investment - Down payment
Unit: USD
Debt Service
Monthly principal + interest payment over the loan term
Unit: USD/month
Annual Revenue
Monthly production × Unit price × 12 months
Unit: USD/year
Operating Costs
User-supplied monthly operating cost (labor, consumables, utilities)
Unit: USD/month
NPV
Net Present Value considering discount rate
Unit: USD
IRR
Internal Rate of Return (%)
Unit: %
Key Assumptions
- •Discount rate: 8-12% (typical for manufacturing investments)
- •Equipment lifetime: 10-15 years
- •Utilization rate: 60-80% of available hours
- •Loan amortized monthly with declining principal balance
- •Revenue and costs remain relatively stable
- •No major technology disruptions
Data Sources & References
Financial formulas
Corporate Finance, Ross, Westerfield, Jaffe
Industry benchmarks
Manufacturing Institute ROI Studies
Depreciation schedules
IRS Publication 946 (MACRS)
Applicable Scenarios
- ✓New equipment purchases
- ✓Equipment upgrade decisions
- ✓Lease vs. buy analysis
- ✓Capacity expansion planning
Limitations & Exclusions
- âš Assumes stable market conditions
- âš Does not account for opportunity costs
- âš Tax implications vary by jurisdiction
- âš Salvage value is estimated and applied at analysis year end
Core Formula
Monthly Cost = (Machine Power + Auxiliary Power) × Operating Hours × Electricity Rate × Load Factor
Variable Definitions
Machine Power
Rated laser/spindle power
Unit: kW
Auxiliary Power
Cooling, extraction, controls
Unit: kW
Operating Hours
Monthly production hours
Unit: hours/month
Electricity Rate
Cost per kWh (varies by region)
Unit: $/kWh
Load Factor
Actual power / Rated power (typically 0.6-0.8)
Unit: ratio
Key Assumptions
- •Load factor: 60-80% (machine rarely runs at full power)
- •Auxiliary systems: 20-40% of main machine power
- •Electricity rates based on industrial tariffs
- •Power factor: 0.85-0.95 (for AC systems)
Data Sources & References
Power consumption
Equipment manufacturer specifications
Energy standards
ISO 14955 series (Machine tool energy evaluation)
Applicable Scenarios
- ✓Monthly/annual energy budgeting
- ✓Equipment comparison (energy efficiency)
- ✓Carbon footprint calculation
- ✓Utility cost forecasting
Limitations & Exclusions
- âš Does not include demand charges
- âš Assumes consistent electricity rates
- âš Does not account for power factor penalties
- âš Seasonal variations not modeled
Core Formula
Utilization % = (Total Part Area / Sheet Area) × 100
Variable Definitions
Sheet Area
Width × Length of raw material sheet
Unit: mm²
Part Area
Sum of all part areas on sheet
Unit: mm²
Kerf Width
Cutting path width (material removed)
Unit: mm
Edge Margin
Minimum distance from sheet edge
Unit: mm
Part Spacing
Minimum gap between parts
Unit: mm
Key Assumptions
- •Kerf width: 0.1-0.3mm (depends on process and material)
- •Edge margins: 5-10mm (for clamp clearance)
- •Part spacing: 2-5mm (thermal distortion prevention)
- •Rectangular nesting (not optimized algorithms)
Data Sources & References
Nesting algorithms
Computational Geometry: Algorithms and Applications
Industry practices
Sheet Metal Industries Best Practices Guide
Applicable Scenarios
- ✓Sheet metal nesting optimization
- ✓Material cost estimation
- ✓Waste reduction analysis
- ✓Quote accuracy improvement
Limitations & Exclusions
- âš Manual nesting (automated software achieves higher utilization)
- âš Does not account for material grain direction
- âš Assumes uniform material thickness
- âš Complex shapes may require lower utilization
General Disclaimer
All calculations provided by LaserCalc Pro are estimates based on standard industry formulas and user-provided data. Actual costs may vary depending on specific equipment efficiency, operator skill, material quality, regional factors, and other variables. Results should be verified by qualified professionals before making critical business decisions. LaserCalc Pro is not responsible for any financial decisions made based on these calculations.
Questions about our methodology? Contact us