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    The document provides details on how to calculate the machine hour rate. It outlines separating machine expenses into standing charges and running charges. It also notes how to calculate depreciation if the purchase price, installation costs, scrap value, and estimated life are given. The machine hour rate is equal to the total of the standing charge rate and variable charge rate, where the standing and variable charge rates are calculated by dividing the total costs in each category by the machine hours.

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    The document provides details on how to calculate the machine hour rate. It outlines separating machine expenses into standing charges and running charges. It also notes how to calculate depreciation if the purchase price, installation costs, scrap value, and estimated life are given. The machine hour rate is equal to the total of the standing charge rate and variable charge rate, where the standing and variable charge rates are calculated by dividing the total costs in each category by the machine hours.

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    The document provides details on how to calculate the machine hour rate. It outlines separating machine expenses into standing charges and running charges. It also notes how to calculate depreciation if the purchase price, installation costs, scrap value, and estimated life are given. The machine hour rate is equal to the total of the standing charge rate and variable charge rate, where the standing and variable charge rates are calculated by dividing the total costs in each category by the machine hours.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    63 views3 pages

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    Uploaded by

    Manisha Kumari
    The document provides details on how to calculate the machine hour rate. It outlines separating machine expenses into standing charges and running charges. It also notes how to calculate depreciation if the purchase price, installation costs, scrap value, and estimated life are given. The machine hour rate is equal to the total of the standing charge rate and variable charge rate, where the standing and variable charge rates are calculated by dividing the total costs in each category by the machine hours.

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    MACHINE HOUR RATE

    FORMAT OF COMPUTATION OF MACHINE HOUR RATE


    Particulars Per Annum or Per Per hour
    Month
    I.STANDING CHARGES (Or) FIXED CHARGES
    Rent
    Lighting and heating
    Foreman’s salary
    Insurance
    Wages of attendants
    Supervision
    Miscellaneous overheads
    General overheads
    Consumable stores etc
    TOTAL STANDING CHARGES
    STANDING CHARGE RATE=
    Total standing charges [A]
    Machine hours
    II. RUNNING CHARGES (or) VARIABLE
    CHARGES (or) MACHINE EXPENSES
    Repairs and maintenance
    Depreciation
    Chemicals
    Power etc.

    VARIABLE CHARGE RATE


    = Total Running charges [B]
    Machine hours

    MACHINE HOUR RATE = A+B


    Note:
     Separate the machine expenses into standing and running charges.
     If purchase price or original cost of the machine, installation charges, scrap (residual)
    value and estimated life of the machine is given, calculate depreciation.
     ie, depreciation = original cost+ installation charges- scrap(residual) value
    Estimated life of the asset
     If supervisor/foreman’s time devoted for the machine is given, salary /wages is calculated
    on the basis of time devoted.
     If area occupied by the machine is given, rent and lighting are calculated on the basis of
    area occupied.
     Setting up time non productive is deducted while calculating Machine Hours/ Effective
    machine hours.
    Q8. The following particulars relate to a new machine purchased:

    Purchase price of Machine Rs.4, 00,000


    Installation expenses Rs.1,00,000
    Rent per quarter Rs.15,000
    General lighting for the total area Rs.1,000 p.m
    Foreman’s salary Rs.30,000 p.a
    Insurance premium for the machine Rs.3,000 p.a
    Estimated repairs for the machine Rs.5,000 p.a
    Estimated consumable stores Rs.4,000 p.a
    Power 2 units per hour at Rs.50 per 100 units
    Estimated life of the machine is 10 years
    The estimated value at the end is Rs.1, 00,000.
    The machine is expected to run 20,000 hours in its life time.
    The machine occupies 25% of the total area.
    The foreman devotes 1/6 of his time for the machine.
    Calculate the machine hour rate for the machine.

    Solution:
    9) Calculate the Machine Hour Rate from the following: (End Term 2018, 7.5 marks)

    Cost of Machine Rs.1, 30,000


    Installation Charges Rs. 20,000
    Working Life 10 years
    Working Hours 1,500 per year
    Repairing charges 40% of Depreciation
    Power 10 units per hour @ Rs. 0.10 per unit
    Lubricating oil Rs. 6 per day of 8 hours
    Consumable stores Rs. 10 per day of 8 hours
    Wages of operator Rs. 4 per day
    Machine Insurance 40% of depreciation

    Solution: Computation of Machine Hour Rate

    Particulars Per Per hour


    Annum
    I. STANDING CHARGES
    Insurance 40% of Depreciation=6,000 [ per hour=6,000 ] 6000 4
    1500 hours 0.5

    Wages of operator Rs. 4 per day=4


    8 4.5
    STANDING CHARGE RATE= [A]
    II. RUNNING CHARGES
    Depreciation=1,30,000+20,000 = 15,000[ per hour= 15000 ]
    10 1500 hours 15,000 10
    Consumable Stores=10
    8 1.25
    Power=10*0.10=1 1

    Lubricating oil 6 0.75


    8
    Repairing Charges[ per hour=6,000 ]
    1500 hours 6,000 4

    VARIABLE CHARGE RATE [B] 17


    MACHINE HOUR RATE = A+B=4.5+17 21.5 Ans

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