2. Meaning
• “The Machine Hour Rate is an actual or
predetermined rate of cost apportionment for
overhead absorption”
3. Calculation
• “Machine hour Rate is calculated by dividing the
cost to be apportioned or absorbed by the number
of hours for which a machine or machines are
operated or expected to be operated”
• Machine Hour Rate = Total Factory Overheads
Total Machine Hours
4. Basis of Apportionment
• Rent, Rates, Taxes, etc.
• Depreciation
• Lighting
• Heating
• Power
• Repairs and Maintenance
• Supervisory Expenses
• Labour Welfare Expenses
• Insurance
• Lubricating Oil, Cotton Waste and Consumable Stores
• Interest included in Hire-Purchase.
6. Standing Charges
• Rent of factory building
• Rates of tax and Insurance of Factory Building
• Insurance Premium of Machine
• Salary of Manager, Supervisor and Foreman
• General Lighting
• Cotton waste, Cloth waste and Lubricating oil
• Consumable stores
• Sundry supplies
• Operator’s wages
• Interest
8. Merits of M.H.R.
• Division in Fixed and Variable Expenses
• Measurement of Efficiency of Machines
• Knowledge of Idle Time
• Facility in Estimation
• Machine vs. Manual Work