From the details furnished below you are required to compute a comprehensive machine-hour rate: Original purchase price of the machine (subject to…

CA Intermediate · Cost and Management Accounting · RTP · September 2024
From the details furnished below you are required to compute a comprehensive machine-hour rate: Original purchase price of the machine (subject to depreciation at 10% per annum on original cost) 12,96,000 Normal working hours for the month (The machine works for only 75% of normal capacity) 200 hours Wages to Machine-man 800 per day (of 8 hours) Wages to Helper (machine attendant) 500 per day (of 8 hours) Power cost for the month for the time worked 1,30,000 Supervision charges apportioned for the machine centre for the month 18,000 Electricity & Lighting (fixed in nature) for the month 9,500 Repairs & maintenance (machine) including consumable stores per month 17,500 Insurance of Plant & Building (apportioned) for the year 18,000 Other general expense per annum 18,000

Suggested Answer and Working Notes:

Effective machine hours = 200 hours × 75% = 150 hours Computation of Comprehensive Machine Hour Rate Particulars Per month (₹) Per hour (₹) Fixed cost Supervision charges 18,000.00 Electricity and lighting 9,500.00 Insurance of Plant and building (18,000 ÷ 12) 1,500.00 Other General Expenses (18,000 ÷ 12) 1,500.00 Depreciation (1,29,600 ÷ 12) 10,800.00 41,300.00 275.33 Direct Cost Repairs and maintenance 17,500.00 116.67 Power 1,30,000.00 866.67 Wages of machine man 196.00 Wages of Helper 136.00 Machine Hour rate (Comprehensive) 1,590.67 Wages per machine hour Machine man Helper Wages for 200 hours Machine-man (₹ 800 × 25) 20,000.00 --- Helper (₹ 500 × 25) --- 12,500.00 Dearness Allowance (DA) 4,500.00 4,500.00 24,500.00 17,000.00

Topics: Overheads - Absorption Costing Method

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