Reliability and uptime
Downtime cost calculator
The cost of downtime is lost contribution margin plus the labor you paid for regardless. Both halves matter: a line that was going to sit idle anyway costs you wages and nothing else, while a line running at capacity costs you every unit it did not make.
Downtime cost = Downtime hours × [(Lost units per hour × Contribution margin per unit) + (Idle staff × Hourly labor rate)]
Sale price minus the variable cost of making it
Fully loaded, including benefits and payroll tax
Show the assumptions
- Formula
- Downtime cost = Downtime hours × [(Lost units per hour × Contribution margin per unit) + (Idle staff × Hourly labor rate)]
Contribution margin per unit, not revenue per unit. Using revenue counts the material and energy you did not consume as a loss, which overstates the figure, usually by a lot.
This is the direct cost. It excludes expedited freight, overtime to catch up, scrapped work in progress and any penalty for a missed delivery, all of which can exceed the figure above on a bad stop. Treat the result as a floor.
Cost of downtime
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Prefilled with an example. Change any number and the result updates.
How to calculate Cost of downtime
Downtime cost = Downtime hours × [(Lost units per hour × Contribution margin per unit) + (Idle staff × Hourly labor rate)]
Contribution margin per unit, not revenue per unit. Using revenue counts the material and energy you did not consume as a loss, which overstates the figure, usually by a lot.
Worked example
- Downtime hours 8 hrs
- Units not produced per hour 120 units
- Contribution margin per unit $4.5
- Staff idle during the stop 6
- Average hourly labor rate $32
Cost of downtime = $5,856.00
Reading the result
This is the direct cost. It excludes expedited freight, overtime to catch up, scrapped work in progress and any penalty for a missed delivery, all of which can exceed the figure above on a bad stop. Treat the result as a floor.
Cost of downtime questions
Should I use revenue per unit or margin per unit?
Margin. When the line stops you also stop buying material and burning energy, so those costs never occur and cannot be counted as losses. Using revenue can overstate the cost of downtime several times over, and a finance reviewer will spot it immediately.
What if the lost production can be caught up later?
Then the real cost is the overtime, expedited freight and displaced work needed to catch up, not the full margin on the units. Recoverable downtime on a line with spare capacity is genuinely cheaper. The loss only becomes permanent when you were selling everything you could make.
How do I use this to build a business case?
Calculate the cost of a typical stop, multiply by how many you had last year, then apply a realistic reduction rather than an aspirational one. A defensible 15% against a documented baseline gets approved. A 50% claim invites the whole case to be picked apart.
Related calculators
Build the case with your own data
UpKeep records the work, the hours and the failures this metric depends on, so Cost of downtime is a report rather than a spreadsheet exercise.