This data pertains to the three machines operating in the manufacturing division of PQR Corp for the financial year 2023-2024: Particulars Estimated…

CA Intermediate · Cost and Management Accounting · PYQS · September 2024
This data pertains to the three machines operating in the manufacturing division of PQR Corp for the financial year 2023-2024: Particulars Estimated Expenses TOTAL (₹) Machines X (₹) Y (₹) Z (₹) Direct Labour Expenses (per quarter) 2,50,000 Oil Expenses (per quarter) 1,03,125 37,500 37,500 28,125 Machine Insurance Expenses (per quarter) 60,000 Depreciation (per annum) 6,00,000 1,00,000 2,00,000 3,00,000 Building Maintenance Expenses (per quarter) 1,00,000 Wages of Operator (per quarter) 2,25,000 Electricity Expenses (per quarter) 3,00,000 Rent and Rates (per month) 80,000 Salary of Technician (per month) 62,500 (The Technician works only on machines X and Y and the Operator controls all three machines and both spend equal time on each of the machines worked upon by them.) There are 14 holidays besides Sundays in the year, of which six are on Saturdays. There was a Strike of workers for 5 working days (including one Saturday). The manufacturing department operates for 8 hours per day on regular week days, while on Saturdays, the operating hours are reduced by 2 hours per day. All machines operate at 80% capacity throughout the year. Assume 366 days in a year. The following additional information is also available: (i) A 20% hike in the price of oil. (ii) A 10% rise in Oil consumption for machines 'X' and 'Y' only. (iii) Particulars Machines X Y Z No. of Workers 5 3 2 Ratio of K.W. Rating 3 3 4 Ratio of Floor space utilized 1 2 1 Required: Prepare a Statement detailing the allocation of expenses to each machine on an annual basis and thereafter, compute the comprehensive machine hour rate for each of the specified machine.

Suggested Answer and Working Notes:

Computation of Comprehensive Machine Hour Rate Particulars Basis of Apportionment Total (₹) Machines X (₹) Y (₹) Z (₹) Standing Charges (Per Annum) Direct Labour Expenses No. of Workers (5:3:2) 10,00,000 5,00,000 3,00,000 2,00,000 Wages of Operator Equal 9,00,000 3,00,000 3,00,000 3,00,000 Machine Insurance Expenses Depreciation (1:2:3) 2,40,000 40,000 80,000 1,20,000 Building Maintenance Expenses Floor Space (1:2:1) 4,00,000 1,00,000 2,00,000 1,00,000 Rent and Rates Floor Space (1:2:1) 9,60,000 2,40,000 4,80,000 2,40,000 Salary of Technician (1:1:0) 7,50,000 3,75,000 3,75,000 - Total Standing Charges 42,50,000 15,55,000 17,35,000 9,60,000 Hourly Rate (A) 856.28 955.40 528.63 Machine Expenses (Per Annum) Oil Expenses Direct (W.N.1) 5,31,000 1,98,000 1,98,000 1,35,000 Depreciation Direct 6,00,000 1,00,000 2,00,000 3,00,000 Electricity Expenses K. W. Rating (3:3:4) 12,00,000 3,60,000 3,60,000 4,80,000 Total Machine Expenses 23,31,000 6,58,000 7,58,000 9,15,000 Hourly Rate (B) 362.33 417.40 503.85 Total Expenses 65,81,000 22,13,000 24,93,000 18,75,000 (A) + (B) 1,218.61 1,372.80 1,032.49 Calculation of Effective Working Hours. Per Machine Per Annum Full Day Working Hours (250 days x 8 hours) 2,000 6 hours per day Working Hours (45 days x 6 hours) 270 Total Hours 2,270 Capacity Utilization 80% Effective working hours 1,816 No. of Shutdown Days Sundays 52 Holidays 14 Strike Period 5 71 No. of 6 Hours Working Days Saturdays 52 Less: Holidays (6) Less: Strike Period (1) 45 Working notes 1. Calculation of Oil Expenses. Particulars Machines X (₹) Y (₹) Z (₹) Oil Expenses 1,50,000 1,50,000 1,12,500 Add: Increase in Price @20% 30,000 30,000 22,500 1,80,000 1,80,000 1,35,000 Add: Increase in Consumption @10% 18,000 18,000 - Total 1,98,000 1,98,000 1,35,000

Topics: Overheads - Absorption Costing Method

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