Old MathJax webview

.

Basis for Apportionment of Machine Expenses The following bases of apportionment of different expenses are required to be considered for the calculation of machine hour rate : Expenses Basis Fixed or Standing Expenses : (1) Rent and Rates Floor area occupied by each machine (2) Heating and Lighting No. of points used or Floor area or heating any machine (3) Supervision Time spent on each machine (4) Lubricating Oil and Consumable Stores Machine hours, Past experience or Capital value. (5) Insurance Insurance value of each machine. Machine Expenses : 1. Depreciation Value of Machine 2. Power Horse power of each machine 3. Repairs Cost of repairs spread over its working life Advantages (1) It helps to measure the relative efficiency of different machines. (2) It facilitates comparison of cost of operating different machines. (3) It helps to ascertain idle time of machines relating to non-productive time. (4) It is the most desirable scientific method, where the time factor is taken into account. Disadvantages (1) It involves more clerical labour in determining the number of machine hours worked. (2) It does not consider where the expenses not proportional to the working hours of machines. (3) It is very difficult to measure the machine hours where the works are completed without operating any machinery. p29 432 A Textbook of Financial Cost and Management Accounting Illustration: 5 Calculate machine hour rate of Machine X Rs. Consumable stores Repairs Heat and light Rent Insurance of building Insurance of machines Depreciation of machines Room services General charges Normal working hours Area of sq. fit. Book value of machines 600 800 360 1,200 4,800 800 700 60 90 10,000 hours 100 12,000