A machine which originally cost - 25,000 has an estimated life of 10 years and is to be depreciated at 2,500 per year. It has remained idle recently…

CA Intermediate · Cost and Management Accounting · MTP · September 2025
A machine which originally cost - 25,000 has an estimated life of 10 years and is to be depreciated at 2,500 per year. It has remained idle recently due to a lack of orders. A special job has now been received that would require the use of the machine for three months. The current net realisable value of the machine is 18,000. If used for the order, its value is expected to fall to 15,000. The routine maintenance cost of the machine is 500 per month when idle. With usage, maintenance and repair costs are expected to increase to 700 per month. Additionally, a temporary machine operator would need to be hired at 800 per month for the duration of the job. What would be the relevant cost of using the machine for the special order?
(A) ₹ 3,600
(B) ₹ 4,200
(C) ₹ 4,800
(D) ₹ 6,000

Suggested Answer and Working Notes:

Correct Answer: Option (D)

₹ 6,000

Topics: Unit & Batch Costing

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