If a Factory follows job costing, then usually one job differs from the other job & hence some jobs may be routine jobs which do not require high setup times.
But it may also be possible that some of jobs may require high set up time due to their specialized nature.
Thus there is a need of computing Two Tier Machine Hour Rate i.e. SEPARATE RATE FOR SETUP TIME & RUNNING TIME OF MACHINE.
In order to compute Tow Tier machine hour rate, the following points should be kept in mind :-
1. If power is Consumed only during running of machine, then calculate power cost only for running time and not for the setup time.
2. Make Separate column for setup time rate & running time rate.
3. Do not Include Maintenance & consumable cost in the Setup time column while calculating Machine hour rate for Setup time.
Next Time I will explain the above concept with the help of the Example.
Thanks & Regards
CA Arvind Singhal
But it may also be possible that some of jobs may require high set up time due to their specialized nature.
Thus there is a need of computing Two Tier Machine Hour Rate i.e. SEPARATE RATE FOR SETUP TIME & RUNNING TIME OF MACHINE.
In order to compute Tow Tier machine hour rate, the following points should be kept in mind :-
1. If power is Consumed only during running of machine, then calculate power cost only for running time and not for the setup time.
2. Make Separate column for setup time rate & running time rate.
3. Do not Include Maintenance & consumable cost in the Setup time column while calculating Machine hour rate for Setup time.
Next Time I will explain the above concept with the help of the Example.
Thanks & Regards
CA Arvind Singhal
Sir ,please continue explanation sir
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