ea sd tn OE As PRODUCTION AND . Costin {e) Tear downtime, Teardows lms slarti wy i rts whe aN Part or element of operation has been completed 1y"h0% the lase . removal of all tools used on the operation For evanutj@netudes the : turret is cleared of all cutting tools ; tools are stored pen, 2 Hexagon, d Places ; all ‘cross slide’ tools are removed ; fig anh (hele 4 id released from the machine = d soon. So eee time taken to removetjob, tools and other auxilige i the machine after the last element of operation hay, paw Pent from Tear-down time is much less than the set up tage Completed. (2) Miscellaneous allowances, Besides above factors the, are other factors which are taken into account while calculating the o> time taken to complete ‘a job or a batch of produc, ainethe Pe caribot work for 8 hours continuously without rest. Also efficiency | decreases as the time passes due to fatigue ete He also i , a Si re wy £ time for tool sharpening, checking measurements and Barina ©) calls. All these. silowareos come under this category, These ~Y allowances generally consume, 15% of etal time. Let us discuss some of the important allowances, () Personal allowance. This time allowed to a worker for his personal needs like-going to rest rooms, smoking, having a cup- of tea, going to lavatories, to take water for personal cleanliness ete. is called the personal allowance. This is generally 5°% of the ele liworkrag tins 1a Scie Beiorien RIG ord eveimes terete lay during the day of }0 to 15 minute duration. ‘These are times of relaxation and are very seldom utilized by the employees for personal needs, Therefore, a Personal allowance must be added to the estimate in addition to the rest period. Fatigue allowance. A worker cannot work whole of the day with same speed. After some time he starts feeling some tireness caused by excessive work, poor lighting, poor ventilation and machine noises ete. All these are caused due to fatigue. Also routine of the work reduces his efficiency towards the end of the day: For all these reasons fatigue allowance is given. Nearly 5%, of the total time is considered as fatigue allowance. (ii) Tool changing and grinding allowances. It is the time- required to remove the tool and its holder to walk upto the grinder ‘to grind the tool, to come back to the machine and then to fix the. tool again in the machine. , (i) Checking allovrance. Yt isthe time taken for checking ii the dimensions. Rough dimensions take less time while accurate: : dimensions require more time. This allowance should be consi- dered only when the operator is doing checking only and no work: on the machine. “If the checking is done during machining time. it should not be considered. (v) Oiling and clearing. It is the time required for cleaning wf the machine and to lubricate its various parts for smooth functioning: of the machine,iii PROD! a appreciation charges of 50 jpments 3 depre a transportation 5 nditures# : d_equit + cost ecial tools aN" | Hiding rent } expe f spi f puilding tc. All nee faclear that 5 oe ; hit erents and factory building » salerme ym above ¥ talaries and commits ‘or expens » for 1 other expendi- ‘| ! » gre known as Over Serial and direct labour etude indirect material | except for dire® fenses, Thus exPere enses oe re known as €XP ah other exP' ' ures are know" 7 pour cost and st i ses 2 = Expenses can be divided into two clas (@) Direct Expenses (ii) Indirect Expenses. iY s charge (j) Direct Expenses. Direct expenses ar eed jer i able expenses include any expenditure other than ditec' Tare, the; ablijcaut labour incurred on a specific cost unit, Thess ar are’ Cx penses which can be charged directly tO particular ioe eos SxPeniee that specific job only. For example, birelolsspecte ee Gone quipment, cost of special jigs and fixtur™ or some SP patterns and its maintenance cost, costs of layouts, Trawings or experimental work on a par ticular job ete. (ii) Indirect Expenses, These are known, 28 overhead charges burden or oncost. All the expenses cver and above, prim charges, burteret expenses, Overhead is the sum of indirect labour cost, indirect material cost and other expenses including service ¥ Which cannot be conveniently charged to specific cost unit. 4 These can be further classified as : iM Factory Expenses or Production Expenses uy Administrative Expenses i Selling Expenses Distribution Expenses. peered 1, Factory Expenses, These e: indirectig} expenditure incurred by the undertakin oa napeeinmsitiocsiel until its completion ready for dispatch.( Factory. ex ae known as factory oncom, production gverhead faceaer ee works oncost, works overhead ete. Some ene eater: -expengés or production expenses are : cence ory (i) Rent, rates and insurance chargable against the works, rks, (ii) Indirect labour e.g. su ssuperv( i ntact labour ¢-¢, supervision such as salaries of foreman} (iii). Consumable stores a1 ind all indi ee 2 oea mabe diovan forms of indirect material au (i) Depreciatio: i plane, il pepreciation, maintenance and repair of buildings (v) Power such as steam, trici eis a s ; = er re ea » & , electricity, hydraulic or come;lamer DUCTION AND COSTING 2 he sum of the : is the i - cost is ri o a ¥ ee aay direct expen’ i ime cost of Di a i Prime cone ee me oebour an a, ee 7 cost of direct material, di a cost+: i ee charges ‘des all the expe’ incl incl Factory Cost, Factory eer HGy factory cost - =Direct lab : Thus Prime cost = Dice aired ses necessary“ Judes factory d clerica! ni i i sory fh he various articles. eco ies an orotic recat ie ech erent ge staffs | timekeepers ; storekeepers ; labour Rapenses connected With nectar charges for power and Eee sf the buildi munning. i hines ; the main running of various mac! etc. hi aipment ; depreciation on machines and tools other equipment ; depreciati achines oncost. In short, it is the sum of prime cost and factory 7 t. Fac Thus Factory cost:=Prime cost +Factory oncos cost is also called Works cost. d minis- Production Cost. It is the sum of factory cost and a‘ trative expenses. Thus Production cost=Factory cost + Administrative expenses... Total Cost. It is the sum of production cost, selling expenses and distribution expenses, 3 Total cost=Production cost +Selling expenses - Distribution, expenses. Total cost is also called ultimate cost or selling cost. Selling Price. If we add Profit in the total cost of the prou’ duct then it is called selling price Selling price=Total cost-+Profit. ‘The selling price is a question of polic purview of the Manager or Board of Directors. In addition to the peat cost there are several other faces which control the selling Price such as the present and Prospective demand, existing compets: tion or trade agreements, comparison with other goods etc, y and comes within the x Catalogue Price, unt allowed to the Rien fice. Some percentage of ors of product is added into the ie market price or By the cost structure k i clemen aa ea sea below we can know how differentiment, coat 54 sme cost of eaoh depos rime 00 Problem 225. Find ot coun alto. - oduction, selling cost. ’ 4 published. a Given, 6000 copies 10 bs printed and PI ae : it: Paper Rs. Printing dept! fk Be Compositors Beh Proof-reader Re Printers Works oncost=40%, of prime cost Binding deptt : Leather Cloth Card-board Gold Sundries Cuttings Folding pares Bindi Fintshing Works oncost= 30% of Prime cost Office oncost =15% of Factory cost Solution. Printing deptt : Material cost =Rs. (3000+420) =Rs. 3420-00 Lobour cost =Rs. (1850+-350+.720) =Rs, 2920-00 Prime cost =Rs. (3420+2920) =Rs. 6340°00 40 Works oncost =6340 x Tor (40% of prime cost) =Rs. 2536'00 Factory cost =Rs. (634042536) . =Rs. 8876°00 Binding dept : Material cost =Rs. (750+-450+ 52542954. 150) =Rs. 2100-00 =Rs. (20-+40-+75-+150+ 75) =Rs. 360-00 “+ Prime cost. =Material cost+Labour cost =Rs. (2100-4360) =Rs. 2460 Labour costELEMENTS OF COST Hence cost of Pr -oduction pet unit 225 = 25 Ans. = Aw culator wants LS > ‘ Problem 2:30. Abfirm produciig, ai, an 7 ane a k Se decks oe ee ry core ety the “oncost ‘and Keeping the previous profit ‘proportions on come the material i Fae piled ltt 608 fy.360 ond the direct wages would be Re 200, The folowing figures relate to the ‘previous year. ‘stock of material on 1st April, 1976 = Rs. 25,000 ‘Stock of material on 31st March, 1975 Purchase of raw material in this pertod “Manufacturing wages = Works oncost “Administrative and sales oncom ‘Sales during the year =Ra. 95,000 Solution. Works oncost= Rs. 7,500" oncost as 4 ff Direct wages The rate of works reentage © during the year 1976-77 Pe 7 7500 =50% 9 75,000 tive and sales oncost as a percentage of ‘The rate of administra 1976-77 Direct wages during the year 15,000" jal cost =25,000 +50,000—27 000 M=Rs. 48,000 W=Rs. 15,000 B=Rs. 7500 Direct mater’ DirectWages +-Works on co nistrative and sales - a oneostCTION AND COSTING | proDu' 60 fhe selling cos Percentage of profit over thé es % 17,000 _ 17 =78,000 78 , » & Now, for the new model, Direct material cost=Rs. 350 Direct labour cost=Rs. 200 Works oncost @ 50% of Direct Wages = 200X59 Rs, 100 100 Administrative and sales oncost @ 50% of Direct wages _ 200 x50 ~~ 100 <. Selling cost of the new model =350 +200-+100+100 =Rs. 750 i . Profi peel rofits 7g % on selling cost =Rs. 100 peas? =a x 750 =Rs. 163'50 Selling price of new model = 750+ 163°50 ee =Rs. 913°50 Ans. \wheblem 2:31. The market price of a lathe is Re. 5000 and the discount allowed to the distributors is 20% of the market price. It is found that the selling cost is }th of the factory cost and if the material cost, labour cost and overhead charges are in the ratio of 4:2, what profit i id th i i ct Eg me ray Solution. Material cost =Rs. 400 Also Material cost : Labour cost : Overhead charges ViA3!2. ~. Labour cost =400x4 =Rs. 1600 and Overhead charges =400x2=Rs. 800 =Rs.(400 + 1600+-800) =Rs. 2800 “+ Factory cost= ale ee ELEMENTS OF COST 61 Selling cost =tth of the factory cost x 2800 t =Rs. 700 i wa cost ‘actory Cost+ Selling cost = 2800+ 700 s. 3500 But the selling price of the lathe =Market price—Discount 20 =5000—5! — 5000—5000 x 5g 000 — 1000 s. 4000 ‘Total Gost+ Profit Selling price—Total cost 1000 —3500 s.500 Ans, SA exurtens 232, A person buys a car of Ra. 25,000 and runs it at the rate of 6000 km a month. The car consumes one litre of petrol for cuery 6 km and the owner has to spend Ra. 7,200 every year om the car for its maintenance, repairs and replacements. ‘Find out the total cost ‘of running the car per km. _ Take useful life of the car as 1,20,000 km. and cost of petrol as Rs. 1°50 per litre. 4 Also find the rate which he should charge per km, if he wants to run the car as @ taxi and earn Rs. 600 per month. Distance sam ved by the car per month, when run as a tazt remains ‘unaltered. ‘Distance covered per month But Selling price or Profit Solution, & =6000 km : ee “| Petrol consumption per month ? q =6000 X —— of 6 : 1000 litres > Cost of petrol per litre i pe Hs =Rs. 150 BY Sr petrol per month i He 1000 x 1°5 . Rs. 1500 Bal Maintenance and repairs charges per year =Rs. 7200 Maintenance and repairs charges Pet month 7200 12 =Rs. 60062 -rotal expenses on the car pe : Rs. (1800 . =Rs. 2100 gince the car,runs 6000 km per month, 2100 Gost per km = 6000 =Re- 0°35 Ans. ris used as @ taxi, the income per month Now when ©! =Re. 600 Monthly expenses OF car . Rs, 2100+. 600 =Rs, 2700 Rate for one km 2700 6000 7 =Re. 0°45 a jon cost per km { _ 25000 I 720,000 Rs. 0721 (ApP-) «, Rate he should charge per ¥™ =45-+21 =66 paise per km Depreciat Ans. A rcovier 233 ‘A worker's ordina i i y & w ry pay ie Re 0°90: per hour + he ia engaged on @ machine operation, his output b 6 pieces per Tor Teme an ne to be allocated to ‘work done on his machin ni to Fe. Oper hour, ‘Find the factory cost per piece (ignore ‘The man is put on pi 4 ; a piece work, the rate being fixed piecs. He inci ; i 9 fined pe eos ae as ee Poe pieces per hou 215 paise ver a Find his new Pater First case: yatput per hour =6 pi , =6 pieces Racker’ sfeaviweri hour . ri =Re. 0°90 Werte aay erates 090 oO =Re. 0° ceeBs COST \Peroblem 2:36. 4 ch Py hour on a machine. factory is producing 1000 bolts’ and nuts tf . Its ‘e i Aso and direct expense is ) material cost is Ra. 400, lab [fsa and direc empenot is Re, 75." The factory oncot 1 "180% of the Mee selling price of each tol mek inn eee een, ‘cost. un : Solution, Material cost M=Rs., 400 Labour cost Direct expense Overh thead charges =150% labour cost isos Too * 50 =Rs. 525. Hence total factory cost =400+350+75+525 | =Rs. 1350 Now, office oncost is 25% of total factory cost ! Office oncost x 1350 | =Rs. 337°50 Hence total cost of production per 1000 bolts and nuts =Factory cost +Office oncost ) Rs. 1350-+Rs. 337°50 =Rs. 1687'50 Production cost per piece __1687'50 Samoug =Rs, 1°687 or say Rs. 1°6% per piece a ement is Rs. 1°75 per piece But the selling price of manag Hence the factory is earning a profit of Rs. 0:06 per piece. Ams. " problem 2:37. An article can be made either by hand or in quantity by mass production methods, In the first cases the time taken 2 hours and overheads are 25% of labour cost. In the latter case time taken ia fourteen hour per 100 articles, but overheads amount No 130% of labour cost. The vnaterial cost per piece is Re. 2 and ate of pay per hour is 80 P in each case. Compare the factory costs Solution, First Case Material cost per article =Rs.ae PRODUCTION AND CO 166 sel le article. 9 gg Rs. 1°60 =25% of labour cost Labour cost pe 1, heads a 728 crepe Rs, 40 = 100 Factory cost =2+1'60 +0°40=Rs. 4 Production Method Material cost =Rs. 2 Labour cost per article 14 =—— "80 100 ca Mas: =Rs. 0112 30 of labour cost _ 130 = "00 +0°112-++0°1456 “2576 Hence ratio of factory cost 4 : 2°25 17721 Ans. Problem 2:38. Prepare a cost statement showing prime cosh) {works cost and production cost of the particular commodity, from th ‘following data Also calculate the selling price per article if the number ‘of products manufactured are 10,000. Raw materials used Cost-of-rawe-material Wages paid to labour Salaries of worke manager and depart- mental work overheads - Overheads %0°112=0°1456 Factory cost =70 tonnes =Re. 200 per tonne =Re, 21,900 omens =Rs, 15,400 arriage inwards =Re. 1609 Electricity =Rs. 800 ok Gas charges =Re. 4000 + Rent and rates of factory = =Rs. 2500 pi and rates of office building =Re, 600 paces for works and office each =Ra. 500 a eee on factory building =Rs, 4,200 ectation on plant and machinery Re. 4.000 Depreciation on office building =Re. 1,000 menee® and telegrams Rs. 280 elling aud diatributi i si em Katributive crpenses =Re, 3,720 =10% on total cost:PRODUCTION AND COSTING. ” 68 Selling Price/article 82,500 _. r = 0000 =Rs. 8:25 ‘ * =Rs. 825 Ans. Exercises 4, What fare the main elements of ©o element in detail giving suitable examples- 2, What do you mean PY direct material cost ? sts? Explain each sumed in th 3, Estimate the volume of material co facture of an eccentric aS shown in ge 2°47- Assume D feet Gnished material to be lost ws ifferent shop PFOCESSES h {Ans. 97912 cc.) 8 + ; L gi 2 |. a0m eo 2 OR a0 Fig. 2°47 5 the orthographic view: 4. Fig. 2°48 show’ 5 fof aj G.I. block, f Estimate the weight of ¢ are the block if the material weighs 72 gm/cu.c™ yhe material e S25 {25 estes Ke ezs—te 625—>| re Fig. 248 Teheoeeen ag the material cost of manufacturi ig. 2°49 which is made ‘of ‘ mild steel. Assw of materi: y aterial as 7°8 gmjc.c, and its cost as Rs. 1=00 per kg: : : [Ans, } Rs. 0195 kg.)