In a machine shop, the MHR is worked out at the beginning of a year on the basis of 1 to 3 weeks of period, which equals to three calendar months. The following estimates for operating a machine are relevant:
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Total working hours available per week: 48 hours |
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Operator’s wages (per month): 650 |
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Supervisor’s salary (per month, common supervisor for three machines): 1,500 |
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Written Down Value of machine (depreciation at 10% plus 2% on an average for extra shift allowance: 1,80,000 |
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Repairs and maintenance (per annum): 16,000 |
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Consumable stores (per annum): 30,000 |
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Rent, rates and taxes (for the quarter apportioned): 5,000 |
Power consumed at 15 units per hour at 40 paise per unit. Power required for productive hours only. Setting up time is part at productive time, but no power is required for setting up jobs. The operators and supervisors are permanent. Repairs and maintenance and consumable stores are variable.
You are required to:
Work out the MHR
Work out the rate for quoting the outside party for utilizing the idle capacity in the machine shop, assuming a profit at 20% above variable cost.