Machine Hour Rate Method
This Method is applicable where work is carried on mostly by the machines because the overheads in such a case are more related to the machines. The factory overheads of the factory are proportioned to the different machines or group of machines. An individual machine is treated to be a cost centre, and sometimes a group of machines which work together in Co-operation is treated to be a cost centre fro the purpose of apportionment. The working hours of a machine are calculated for the period for which the machine is to run. Machine hour rate is scientific, practical and accurate. It helps in finding out idle machines cost and also in decision making.
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