Page 197 - DCOM202_COST_ACCOUNTING_I

Unit 9: Absorption of Overheads

10. From the under noted data, calculate the Machine-hour Rate: Notes
Cost of Machine ` 30,500

Scrap Value ` 2,500
Estimated life of the Machine 12 years
Working days per year 200 days of 8 hours; 100 days of 6 hours
Maintenance and Repairs 7.5% of the cost of machine
Stores Issued ` 1,000

power Consumption ` 2 per operative hour
Insurance premium 1% of cost of the machine
Supervision Expenses per year ` 7,500
Idle Time estimate 10%

11. Calculate Machine-hour Rate from the following information:
Cost of Machine ` 28,700
Establishment Charges ` 300
Break-up Value ` 500
Expected Life 10 years
Rent of Workshop (per annum) ` 6,000

Space occupied by Machine 10%
Annual Insurance ` 450
Repairs and Maintenance 25% ` 2,000
power Used (per annum) ` 800

20% of Total production Expenses ` 5,000
Working days in a year 250
Working Hours per day 8 hours
Idle Time 20% of total time
Hint: Total hours (250 × 8) = 2,000 – 400 (Idle Time 20%) = 1600 hours

Answers: Self Assessment

1. fixed overhead rate 2. under absorption

3. direct labour hours 4. Machine hour rate
5. units produced 6. Machine hour rate
7. percentage on direct material cost 8. predetermined overhead rate
9. Dual hour rate 10. Machine hour rate

11. False 12. True
13. True 14. True

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