A Ludhiana based casting industry has received an order for 2,000 castings of an automobile part. Estimate the cost of entire order based on unit method. Various components expenses involved are as follows: Cost of raw material ₹450 per kg with the amount of bulk material being 3 tons, Cost of

Question

A Ludhiana based casting industry has received an order for 2,000 castings of an automobile part. Estimate the cost of entire order based on unit method. Various components expenses involved are as follows:
Cost of raw material ₹450 per kg with the amount of bulk material being 3 tons, Cost of machining and tooling = ₹2,000 per hour with total estimated hours to be equal to 1,000. The labor costs associated with the order are as follows: molding, casting and cleaning at the rate of ₹500 per hour with total estimated time equal to 4,000 hours. Cost associated with finishing, packaging and shipping = ₹400 per hour with total estimated equivalent number of hours to be 1,000. There is also involvement of indirect labor worth 500 hours costing ₹750 per hour.

Accepted Answer

Apply Equation (15.1) to each of the five areas and sum the results to obtain total cost [latex]C_{T}[/latex]. The details of calculation are shown in Table 15.1.

[latex]C_{T}= U imes N[/latex]

Table 15.1 Total cost estimate

Resource	Amount, N	Unit Cost Factor, U	Cost estimate = [latex]U imes N[/latex]
Material	3 tons = 3,000 kg	₹ 450 per kg	₹ 13,50,000
Machinery and Tooling	1,000 hours	₹ 2,000 per hour	₹ 20,00,000
Labor, Molding, Casting and Cleaning	4,000 hours	₹ 500 per hour	₹ 20,00,000
Labor, Finishing, Packaging and Shipping	1,000 hours	₹ 400 per hour	₹ 4,00,000
Labor, Indirect	500 hours	₹ 750 per hour	₹ 3,75,000
Total Cost Estimate			₹ 61,25,000

Question 15.1: A Ludhiana based casting industry has received an order for ...

This Question has been Answered.

Already have an account?

Login

Related Answered Questions