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Machine Hour Rate Ormat of Computation of Machine Hour Rate

The document provides details on how to calculate the machine hour rate, including separating machine expenses into standing and running charges. It notes key factors like depreciation, estimated life, scrap value, rent and overhead allocation that are used to determine the standing and variable charge rates, which are then summed to calculate the total machine hour rate. Standing charges include fixed costs while running charges include variable costs like repairs and power. The machine hour rate is the total cost per hour to operate the machine.

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2K views

Machine Hour Rate Ormat of Computation of Machine Hour Rate

The document provides details on how to calculate the machine hour rate, including separating machine expenses into standing and running charges. It notes key factors like depreciation, estimated life, scrap value, rent and overhead allocation that are used to determine the standing and variable charge rates, which are then summed to calculate the total machine hour rate. Standing charges include fixed costs while running charges include variable costs like repairs and power. The machine hour rate is the total cost per hour to operate the machine.

Uploaded by

kchahal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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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.
Q7. From the following particulars compute machine hour rate:

Cost of machine 1, 14,800


Installation charges 5400
Anticipated life of machine 10 years
Residual value at the end of 10 years 5000
Rent and rates per annum 12000
Insurance of the machine p.a 3000
Repairs and maintenance p.a 8640
Consumable stores p.a 1200
Production services p.a 1080
Power cost is 5 units per working hour @ 40 paisa per unit
Setting up time (non productive) 400 hours
There are 300 working days of eight hours in a year
Solution:
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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