Question 1

Compute the machine hour rate from the following data;

Rs.
Cost of Machine 1, 00,000
Installation Charges 10,000
Estimated scrap value after the expiry of 15 years 5,000
Rent and rates for the shop per month 200
General Lighting for the machine p .a 300
Insurance premium for the machine p.a. 960
Repair and maintenance expenses p.a. 1,000
Power consumption – 10 units per hour, rate of power for 100 units 20
Estimated working hours p. a. 2,000
Shop supervisor’s salary per month 600

The machine occupies 25% of the total area of the shop. The supervisor is expected to devote 20% of this
time for supervising the machine.

Question 2
A machine costs Rs. 90,000 and is deemed to have a scrap value of 5% at the end of its effective life (19
years.). Ordinarily, the machine is excepted to run for 2,400 hours per annum but it is estimated that 150
hours will be lost for normal repair and maintenance and further 750 hours will be lost due to staggering.

The other details in respect of the machine shop are:

a. Wages, bonus and provident fund contribution of each of two operators.
(Each operator is in charge of two machines) Rs. 6,000 per year
b. Rent and rates of the shop Rs. 3,000 per year
c. General lighting of the shop Rs. 250 per month
d. Insurance premium for the machines Rs. 200 per month
e. Cost of repairs and maintenance per machine Rs. 250 per quarter
f. Shop supervisor’s salary Rs. 500 per month
g. Power consumption of the machine per hour 20 units,
Rate of power per 100 units is Rs. 10
h. Other factory overheads attributed to the shop 4,000 per month
There are four identical machines in the shop. The supervisor is expected to devote one fifth of his time for
supervising the machine, the balance time being used for other productive purposes.
Compute a comprehensive machine hour rate from the above details.

Question 3
The following is a schedule of expenses allocated to three machines A, B & C viz.
A B. C.
Rs. Rs. Rs.
 Rent and rates 75 59 120
Insurance 2 1 4
Power 128 146 273
Supervision 40 30 60
Organization ( Wages of clerk and time keeper) 10 7 15
Stores services 20 29 46
Tools setters 93 73 129
Tools Makers 194 145 214
Oil and sundries 8 12 7
Depreciation and repairs 69 100 83
639 602 951
In addition to this expenses, there was an expenses, there was an expenses of operating an overhead crane,
which was necessary to bring heavy material to the machines. The expenses were as follows.
Rs.
Power consumed by the crane 227
Wages of crane driver 216
Repairs 28
Depreciations 49
Oil and sundries 5
Sundry charges allocated to the crane 45
570

The number of hours the machine were during the period represented by the above expenditure was
follows:

A B C
With use of crane 160 130 480

Without use of crane 428 577 120

588 707 600

Calculate the machine hour rate applicable to each machine, distinguishing between the hours when the
crane was used and the hours it was not.

Question 4
A Ltd. engineering company, having 25 different types of automatics machines, furnishes you the
following. Data for 1997-98 to enable you to calculate the absorption rate in respect of machine B.
1. Cost of machine Rs. 50,000
Life 10 years Scrap value is nil

2. Overhead expenses are

Factory Rent R s. 50,000 p. a.

Heating and lighting Rs. 40,000 p. a.

Supervision Rs. 150,000 p. a.

 Reserve equipment for machine B. Rs. 5,000 p. a.

Area of the factory 80,000 sq. ft.

Area occupied by the machine 3,000 Sq. ft.

Power cost 50 paisa per hour while in operation.

Wages of operator is Rs 24 per day of 8 hours.

Including all fringe benefits. He attends to one machine
When it is under set up and two machines while under operation.

3. Estimated production hours 3,600 p. a.

Estimated setup hours 400 p. a.

Prepare a schedule of comprehensive machine hour rate and find the cost of the following jobs.
JOB 1102 JOB 1308
Set up time (hours) 80 40

Operation time(hours) 130 160