Page 80 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 5: Overheads

36,000 Notes
= × 100 = 66.67%
54,000
Overhead charges @ 66.67% chargeable to the job for which materials used accounted for
` 6,000.
= 6,000 × 66.67 = 4,000
100
2. Labour Hour Rate:
Overhead expenses
=
Direct labour hours
36,000
= = ` 1
36,000
Overhead for the job @ ` 1 for 3,200 hours
= ` 3,200

3. Machine Hour Rate:
Overhead expenses
=
Machine hours
36,000
= = ` 1.20
30,000
Overhead for the job @ ` 1.20 for 2,400 hours

= ` 2,880

Example: The following annual expenses are incurred in respect of a machine where
annual labour is almost zero and where the work is done by means of fi ve machines of exactly
similar type and specifi cations.

`

Rent and rates (Proportioned to the floor space occupied for the shop) 4,830
Depreciation on each machine 500
Repairs and maintenance for fi ve machines 1,000
Power (as per metre) @ ` 1 per 16 units consumed for the shop 3,750

Electric charges for light in the shop 540

Attendant: There are two attendants for the five machines and they are each
paid ` 60 per month

Supervision: There is one supervisor for the five machines whose salary
are ` 250 per month
Sundry supplies, such as lubricants, jute and cotton waste, etc., for the shop 494
Hire-purchase installment payable for the machines (including ` 300 as interest)

The machine uses 10 units of power per hour 1,200

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