Professional Documents
Culture Documents
QUESTIONS-ANSWERS
Methods Of Overhead Absorption
Hourly Rates
Cost Of
Cost of Rent & Rates
Lighting &
Power Heating
Steam Supervision
Oil Insurance
Repairs Cotton Waste
Maintenance Indirect Labour
Depreciation Consumable Stores
Lubricants
Methods Of Overhead Absorption
Hourly Rates
Uniform Period
Machine Hour Basis For Apportionment
Rate
Variable Cost Calculation
Depreciation
Maintenance
1. Calculate the machine hour rate from the following data:
50
Standing charges -------- 0.25
200
Variable charges :
19,200 - 1,200 1.80
Depreciation ---------------------
10,000
150
Repairs and maintenance -------
200 0.75
300 x 4
8.00
Standing charges -------------
150
Variable charges :
42,000 – 2,0000
Depreciation --------------------
10 x 2,000 2.00
10,000
Repairs --------------------
10 x 2,000 0.50
Standing charges :
1,800
Repairs -----------------
10 x 4,380 0.04
Insurance 960
Supervisor’s salary 600 x 1 x 12 1,440
5
_________
Total Standing charges 3,900
--------------
1.95
Standing charges per hour (3,900 ÷ 2,000)
Variable charges :
1,00,000 + 10,000 – 5,000 3.50
Depreciation --------------------------------
15 x 2,000
1,000 0.50
Repairs and maintenance ----------
2,000
2.00
Power consumption : 10 units per hour @ Rs.20 per 100 units
Power consumption 10 units per hour. The machine occupies 1/4th of the
total area of the shop. The supervisor is spending 1/5th of his time for
this particular machine.
6. Computation of Machine Hour Rate
Particulars Per Per Hour
annum (Rs.)
(Rs.)
Standing charges
Rent 250 x 12 x 1
4
750
Power : 10 x 50 5.00
100
It is assumed that machine will work for 1,800 hours p.a. and that will incur Rs
1,125 for repairs and maintenance for life. It is further assumed that 5 units of
power would be used per hour available at 6 paise per unit, and that the life of
machine will be of 10 years.
8. Computation of Machine Hour Rate
20 x 50
(b) Chemical Solution ---------------- 0.53
1,900
Variable charges :
10,000 – 1,000
(l) Depreciation ----------------------- 0.45
10 x 2,000
20 x 50
(p) Chemical Solution -------------- 0.50
2,000
1,900 x 16 x 0.20
(t) Electricity -------------------------- 3.04
2,000
Rs.
Purchase price 4,00,000
Installation expenses 1,00,000
Rent per quarter 3,750
General lighting for the total area 1,000 per month
Foreman’s salary 30,000 per annum
Insurance premium for the machine 3,000 per annum
Estimated repairs for the machine 5,000 per annum
Consumable Stores 4,000 per annum
Power consumed 2 units per hour at Rs.50 per 100 units. The
estimated life of the machine is 10 years and scrap value at the end
of 10th year is Rs.1,00,000. The machine is expected to run 20,000
hours in its lifetime. The machine occupies 25% of total area. The
foreman devotes 1/6th of his time for the machine. Calculate
machine hour rate for the machine.
10. Calculation of Machine Hour Rate
Particulars Per annum Per Hour
(Rs.) (Rs.)
Standing Charges
3,750 x 4 3,750
Rent -----------------
4
1,000 x 12 3,000
Lighting ---------------------
4
30,000
Foreman’s Salary ------------- 5,000
6
Insurance 3,000
Stores
4,000
--------
Total Standing Charges 18,750
--------
Standing charges per hour (18,000 ÷ 2,000) 9.375
Variable charges :
4,00,000 + 1,00,000 - 1,00,000
Depreciation -------------------------------------------- 20.000
10 x 2,000
5,000
Repairs ---------- 2.500
2,000
2 x 50 1.000
Power ------------------------
100
Machine Hour 32.875
Rate
11. From the following particulars, compute Machine Hour Rate :
Rs.
Cost of Machine 1,14,800
Installation charges 5,400
Anticipated life of machine 10 years
Residual value at the end of 10 years 5,000
Rent and rates per annum 12,000
Insurance of the machine p.a. 3,000
Repairs and maintenance p.a. 8,640
Consumable stores p.a. 1,200
Total production services p.a. 1,080
Variable charges :
1,14,800 + 5,400 - 5,000 11,520
Depreciation -----------------------------------
10
4,800
Power ( 300 x 8 x 5 x 0.40)
8,640
Repairs and maintenance
Power consumed by the machine is 20 units per hour at a cost of 25 paise per
unit. Additional charges at 5 paise per unit are payable on the total units
consumed if the same exceeds the basic consumption of 2000 units per
month.
12. Computation of Machine Hour Rate
Per Per
Particulars annum hour
(Rs.) (Rs.)
Standing charges
Variable charges
1,44,000 + 6,000 - 6,000
• Depreciation ----------------------------------- 12.00
12,000
12,000
(xiii) Repairs ----------- 1.00
12,000
Computation of Machine Hours :
•Power bill per year = Rs.7,200 Power bill per hour = 20 units x 25 p. = Rs.5
Therefore No.of machine hours per annum = 7,200/5 = 1,440 hours