Meaning
Accounting allocation methods for high-value production equipment divide the acquisition costs of injection molding machinery or complex multi-cavity tooling over the expected lifespan of the assets. This systematic distribution of expense, known as capital amortization, allows polymer processors to incorporate tooling and equipment depreciation directly into the hourly machine rate or individual part cost.
Tooling Charge
Injection molders often charge the high upfront engineering and machining costs of a custom hot-runner mold by adding a surcharge to each molded component until the asset is paid off. This approach manages cash flow. If production volumes fall short of the forecast, the manufacturer fails to recover the tool cost, whereas exceeding the volume generates additional margin once the repayment period concludes.
Cost Allocation
The choice between amortizing tooling costs or paying them as a capital expense alters the unit price structure and the breakeven threshold of a molding run. For high-volume automotive runs using virgin polypropylene, the tool cost is spread so thinly that its effect on unit cost is negligible compared to resin price fluctuations. Conversely, for low-volume medical devices molded from specialized engineering resins, the amortized tooling cost can exceed the raw material cost per part.
Equipment Depreciation
Machinery depreciation represents the reduction in value of the molding press and auxiliary dryers, which directly affects the hourly machine rate charged to a project. A long depreciation schedule reduces the hourly rate, making the molder competitive, but it increases the risk of running obsolete or worn-out machinery that can no longer hold tight tolerances.
