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A manufacturing unit has added a new machine to its fleet of five existing identical machines. The total cost of purchase and installation of the machine is Rs. 15,00,000, estimated life of machine is 15 years and estimated scrap value at the end of the life is Rs. 60,000. Other relevant data are as follows: I. Budgeted working hours is 2400 based on 8 hours per day for 300 days. This includes 400 hours for plant maintenance and 200 hours for plant set-up. Set-up time is considered to be productive time. ii. Power consumed by machine is 30 units per hour at a cost of Rs. 2 per unit. No power is consumed during setup or maintenance. ilii. Machine requires special oil for heating which is replaced once in every month at a cost of Rs. 2500. iv. Estimated cost of maintenance of the machine is Rs. 1000 per week of 6 working days. v. 3 operators control the operation of six machines and the average wages per operator amounts to Rs. 900 per week plus 40% of wages as bonus. vi, General overheads allocated to the machines during the last year was Rs. 120,000. During the current year it is estimated that there will be increase of 12.5%. You are required to compute comprehensive machine hour rate for new machine taking one year as common base. Actual overhead incurred for 2018 is Rs. 4,00,000 and actual productive hours is 2500 hours. Calculate over or under absorption rate and over or under absorbed overhead amount for 2018.

A manufacturing unit has added a new machine to its fleet of five existing identical machines. The total cost of purchase and installation of the machine is Rs. 15,00,000, estimated life of machine is 15 years and estimated scrap value at the end of the life is Rs. 60,000. Other relevant data are as follows: I. Budgeted working hours is 2400 based on 8 hours per day for 300 days. This includes 400 hours for plant maintenance and 200 hours for plant set-up. Set-up time is considered to be productive time. ii. Power consumed by machine is 30 units per hour at a cost of Rs. 2 per unit. No power is consumed during setup or maintenance. ilii. Machine requires special oil for heating which is replaced once in every month at a cost of Rs. 2500. iv. Estimated cost of maintenance of the machine is Rs. 1000 per week of 6 working days. v. 3 operators control the operation of six machines and the average wages per operator amounts to Rs. 900 per week plus 40% of wages as bonus. vi, General overheads allocated to the machines during the last year was Rs. 120,000. During the current year it is estimated that there will be increase of 12.5%. You are required to compute comprehensive machine hour rate for new machine taking one year as common base. Actual overhead incurred for 2018 is Rs. 4,00,000 and actual productive hours is 2500 hours. Calculate over or under absorption rate and over or under absorbed overhead amount for 2018.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter13: The Balanced Scorecard: Strategic-based Control
Section: Chapter Questions
Problem 8E: Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its...
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A manufacturing unit has added a new machine to its fleet of five existing identical machines. The total cost of purchase and installation of the machine is Rs. 15,00,000, estimated life of machine is 15 years and estimated scrap value at the end of the life is Rs. 60,000. Other relevant data are as follows: I. Budgeted working hours is 2400 based on 8 hours per day for 300 days. This includes 400 hours for plant maintenance and 200 hours for plant set-up. Set-up time is considered to be productive time. ii. Power consumed by machine is 30 units per hour at a cost of Rs. 2 per unit. No power is consumed during setup or maintenance. ilii. Machine requires special oil for heating which is replaced once in every month at a cost of Rs. 2500. iv. Estimated cost of maintenance of the machine is Rs. 1000 per week of 6 working days. v. 3 operators control the operation of six machines and the average wages per operator amounts to Rs. 900 per week plus 40% of wages as bonus. vi, General overheads allocated to the machines during the last year was Rs. 120,000. During the current year it is estimated that there will be increase of 12.5%. You are required to compute comprehensive machine hour rate for new machine taking one year as common base. Actual overhead incurred for 2018 is Rs. 4,00,000 and actual productive hours is 2500 hours. Calculate over or under absorption rate and over or under absorbed overhead amount for 2018.
Transcribed Image Text:A manufacturing unit has added a new machine to its fleet of five existing identical machines. The total cost of purchase and installation of the machine is Rs. 15,00,000, estimated life of machine is 15 years and estimated scrap value at the end of the life is Rs. 60,000. Other relevant data are as follows: I. Budgeted working hours is 2400 based on 8 hours per day for 300 days. This includes 400 hours for plant maintenance and 200 hours for plant set-up. Set-up time is considered to be productive time. ii. Power consumed by machine is 30 units per hour at a cost of Rs. 2 per unit. No power is consumed during setup or maintenance. ilii. Machine requires special oil for heating which is replaced once in every month at a cost of Rs. 2500. iv. Estimated cost of maintenance of the machine is Rs. 1000 per week of 6 working days. v. 3 operators control the operation of six machines and the average wages per operator amounts to Rs. 900 per week plus 40% of wages as bonus. vi, General overheads allocated to the machines during the last year was Rs. 120,000. During the current year it is estimated that there will be increase of 12.5%. You are required to compute comprehensive machine hour rate for new machine taking one year as common base. Actual overhead incurred for 2018 is Rs. 4,00,000 and actual productive hours is 2500 hours. Calculate over or under absorption rate and over or under absorbed overhead amount for 2018.
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