Analysis of costs by behaviour for decision-making. The Northshire Hospital Trust operates two types of specialist X-ray scanning machine, XR1 and…
CA Intermediate · Cost and Management Accounting · RTP · May 2026
Analysis of costs by behaviour for decision-making. The Northshire Hospital Trust operates two types of specialist X-ray scanning machine, XR1 and XR50. Details for the next period are estimated as follows: Machine XR1 XR50 Running hours 1,100 2,000 (₹) (₹) Variable running costs (excluding plates) 27,500 64,000 Fixed costs 20,000 97,500 A brain scan is normally carried out on machine type XR1: this task uses special X-ray plates costing 40 each and takes four hours of machine time. Because of the nature of the process, around 10 per cent of the scans produce blurred and therefore useless results. Required: (a) Calculate the cost of a satisfactory brain scan on machine type XR1. (b) Brain scans can also be done on machine type XR50 and would take only 1.8 hours per scan with a reduced reject rate of 6 per cent. However, the cost of the X-ray plates would be 55 per scan. Required: ADVISE which type should be used, assuming sufficient capacity is available on both types of machines.
Suggested Answer and Working Notes:
(a) Variable Cost per Running Hour of Machine XR1 Cost Component Calculation ₹ Variable cost per running hour 27,500 ÷ 1,100 hours 25.00 Fixed cost per running hour 20,000 ÷ 1,100 hours 18.18 Cost of Brain Scan on Machine XR1 Cost Component Calculation ₹ Variable machine cost 4 hours × ₹ 25 100.00 X-ray plates 40.00 Total variable cost 140.00 Fixed machine cost 4 hours × ₹ 18.182 72.73 Total cost of a scan 212.73 Total cost of a satisfactory scan 212.73 ÷ 0.9 236.37 (b) Relevant Costs for an Additional Scan Machine Cost Component Calculation ₹ XR1 Variable cost per scan 140.00 Variable cost per satisfactory scan 140 ÷ 0.9 155.56 XR50 Variable machine cost per scan (64,000 ÷ 2,000 hours) × 1.8 hours = 32 × 1.8 57.60 X-ray plates 55.00 Variable cost per scan 112.60 Variable cost per satisfactory scan 112.60 ÷ 0.94 119.79 The relevant costs per satisfactory scan are cheaper on Machine XR50 and therefore brain scans should be undertaken on this machine.
Topics: Job Costing
Related Questions in this Topic
- Pintu Ltd. operates in beverages industry where it manufactures soft-drink in three sizes of Large (3 litres), Medium (1...
- Riya Engineering Works undertakes job work on a contract basis. The following information is available in respect of Job...
- A factory operates 8 hours per day with 6 working days in a week. The worker is paid @500 per day as basic plus 40% dear...
- A manufacturing company follows a job costing system. The following data is extracted from its books for the year ended ...
- The following details are available for a job work: Material issued - 60,000; return to stores - 8,000 Dept A labour: 80...