An engineering company, engaged in the manufacture of various heavy engineering products, has…

An engineering company, engaged in the manufacture of various heavy engineering products, has installed one Pegard Numerical Control Horizontal Borer for specialised manufacturing operations. Calculate the machine hour rate on the basis of the following particulars:

(i) F.O.B. cost of machine, Rs. 24 lakhs. (ii) Customs duty, insurance, freight, etc. Rs. 11 lakhs. (iii) Installation expenses Rs. 3 lakhs. (iv) Cost of tools adequate for 2 years only Rs. 4 lakhs. (v) Cost of machine room Rs. 3 lakhs. (vi) Cost of air-conditioning for machine room Rs. 2 lakhs. (vii) Rate of interest on term loan to finance the above capital expenditure 12% per annum. (viii) Salaries, etc. for operators and supervisory staff Rs. 2 lakhs per year. (ix) Cost of electricity Rs. 11 per hour. (x) Consumption of stores Rs. 5,000 per month. (xi) Other expenses Rs. 5 lakhs per annum. (xii) Assume rate of depreciation as 10% per annum on fixed assets. (xiii) Total working hour in the machine room is 200 hours in a month. (xiv) Loading and unloading time is 10% of machine time. (xv) You can make suitable assumptions, if necessary, for the purpose of your computation.

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