CA Inter P4 · Chapter 4 · Question 1 of 11
A machine costs ₹12,00,000, has an estimated scrap value of ₹60,000 and a life of 10 years. It is expected to run 2,000 hours a year, of which 5% will be lost in maintenance. It consumes 15 units of power per running hour at ₹8 per unit, and repairs are estimated at ₹38,000 a year. The machine hour rate is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) ₹200.00
Explanation
Effective running hours = 2,000 x 95% = 1,900. Depreciation per hour = (₹12,00,000 - ₹60,000) / 10 / 1,900 = ₹60. Power = 15 x ₹8 = ₹120. Repairs = ₹38,000 / 1,900 = ₹20. Machine hour rate = ₹60 + ₹120 + ₹20 = ₹200. Using 2,000 hours instead of effective hours gives ₹196.00.
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