This is a very difficult answer to answer within a single post but I'll give it a try.
Tolerances, Cost and Machine capability
The very first thing you need to remember is that tolerances are indirectly related to cost. More precisely, having tight tolerances means that two objects will be more closely matched compared to two others with looser tolerances. However in order to achieve tighter tolerances, you need to use better machines, different processes and/or better trained personnel.
In the following graph you can see a comparison of the relative cost( in log scale), with respect to a few different processes. Also you can see for the different processes typical tolerance capabilities for the process.
Obviously, having tighter tolerances is equivalent to dimensional accuracy. The dimensional accuracy is desired because having a tighter dimensional envelope results in more predictable behavior of the product.
So bottom line is that you should strike the balance between manufacturing cost and the dimensional accuracy..
In general, ISO 286 determines the international tolerances grades for nominal sizes. The symbol for each grade is IT followed by an integer from 1 up to 20 (the only exception is IT01 which is tighter that IT1). The higher number IT grade the looser the tolerance. Also, above IT6, every 5 grades there is a tenfold increase.
In general, the following IT grades are used:
- Production of gauges and instruments: IT01, IT0, IT1, IT2, IT3, IT4, IT5, IT6..
- Precision and general Industry:IT 5, IT6, IT7, IT8, IT9, IT10, IT11, IT12
- Semi finished products: IT11, IT14, IT15, IT16
- Structural Engineering: IT16, IT17, IT18
Tolerances for holes and shafts.
A commonly used system in the fitting of holes and shafts revolves around the concepts of
- loose fit
- transition fit
- interference fit
Under this system, hole dimensional tolerances are denoted with upper case Letters followed by a number (e.g G6, H7), while shaft dimensional tolerances are denoted with lower case (h7, p6).
Letters prior to H (e.g. ABC ) are related to bigger holes and, smaller diameters for shafts. Smaller numbers are related to tighter limits on the tolerances.