Due to frequent power cuts and inconsistent water supply from the Electricity Board, Anju Manufacturing Pvt. Ltd. — a mid-sized engineering goods…

CA Intermediate · Cost and Management Accounting · RTP · September 2025
Due to frequent power cuts and inconsistent water supply from the Electricity Board, Anju Manufacturing Pvt. Ltd. — a mid-sized engineering goods manufacturer based in Pune — decided to set up its own captive power generation plant. The plant is critical for ensuring uninterrupted production across its two major units: Unit 1: Produces industrial machinery components (highly power-intensive operations)Unit 2: Manufactures agricultural equipment parts (moderate power load) The factory operations heavily depend on continuous electric and water supply for running CNC machines, foundry operations, welding units, and assembly lines. Any electricity failure leads to major production delays, idle labour costs, and penalties from clients due to late deliveries. After analysing the risk of depending entirely on the electricity board, the company’s Board of Directors approved a proposal to invest in a dedicated steam boiler and power generation plant within the factory premises. The following information has been taken from the records in connection with the generation of power during the month: Coal used 1,800 Tonnes @230 per tonneFreight and handling charges: 7% of the value of coal used.Oil: 15 Tonnes @4,500 per tonneWater: 80,000 litres Re. 0.07 per litreSteam boiler cost - 50,00,000 with a residual value of 2 lakh after a life of 10 years.Salaries and wages of the boiler house:15 skilled workers @1,300 per month each30 semi-skilled workers @1100 per month each50 unskilled workers @900 per month eachRecovery on account of sale of ashes: 150 tonnes 60 per tonne.Salary and wages of generating station:60 skilled workers @1,200 per month each20 semi-skilled workers @1000 per month each30 unskilled workers @850 per month eachRepairs and maintenance of generating equipment:30,000Depreciation of generating equipment:75,000Insurance premium on generating plant:15,000Fuel handling and storage expenses:8,000Rent of generating station premises:12,000 Share of administration charges:65,000Total number of units generated (before losses): 2,00,000 unitsNormal losses in the process: 3,000 units generated.Electricity purchased from grid to meet emergency requirements: 5,000 units @6 per unit.10% of the effective units generated are used internally by the generator department itself Additional Information: The purchased electricity units are not subject to any loss adjustment.Emergency purchase units should be added to the effective units available for use. You are required to CALCULATE the total cost of electricity generated and the cost of generating electricity per unit.

Suggested Answer and Working Notes:

Operating Cost Sheet Particulars Amount (₹) Boiler House Cost Coal consumed (1,800 tonnes @230) 4,14,000 Freight, loading and unloading charges (7% of coal cost) 28,980 Oil consumed (15 tonnes @4,500) 67,500 Water consumed (80,000 litres @ Re. 0.07) 5,600 Depreciation of steam boiler ((₹ 50,00,000 -2,00,000) / (10 years * 12 months)) 40,000 Salaries and wages of boiler house workers: Skilled workers (15 @1,300) 19,500 Semi-skilled workers (30 @1,100) 33,000 Unskilled workers (50 @900) 45,000 Less: Recovery from sale of ash (150 tonnes @60) (9,000) Total Cost (I) 6,44,580 Generating Station Costs Salaries and wages of generating station staff: Skilled workers (60 @1,200) 72,000 Semi-skilled workers (20 @1,000) 20,000 Unskilled workers (30 @850) 25,500 Repairs and maintenance of generating equipment 30,000 Depreciation of generating equipment 75,000 Insurance premium on generating plant 15,000 Fuel handling and storage expenses 8,000 Rent of generating station premises 12,000 Share of administration and general expenses 65,000 Total Cost (II) 3,22,500 Other Costs Electricity purchased from grid (5,000 units @6) 30,000 Total Cost (III) 30,000 Total Cost of Electricity Generated and Purchased (I+II+III) = 6,44,580 +3,22,500 +30,000 = 9,97,080 Working Note: Units Available Particulars Units Total Units Generated 2,00,000 Less: Normal loss in generation (3,000) Net Own Units Generated 1,97,000 Add: Units purchased from grid 5,000 Total Effective Units Available 2,02,000 Less: 10% Units used by generating department (20,200) Units Available for Factory Operations 1,81,800 Cost per unit = Total Cost of Electricity Generated and Purchased / Units Available for Factory Operations = 9,97,080 / 1,81,800 units = 5.48 per unit

Topics: Service Costing

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