In a machine shop, the machine-hour rate is worked out at the beginning of a year on the basis of a 13-week period which is equal to three calendar months. The following estimates for operating a...

In a machine shop, the machine-hour rate is worked out at the beginning of a year on the basis of a 13-week period which is equal to three calendar months. The following estimates for operating a machine are relevant.

Power consumed is 10 units per hour @ `5 per unit. Power is required for productive hours only. Setting-up time is part of productive time but no power is required for setting-up jobs. The operator and supervisor are permanent. Repairs and maintenance and consumable stores are variable. You are required to:

(a) Work out the machine-hour rate

(b) Work out the rate for quoting to the outside party for utilising the idle capacity in the machine shop assuming a profit of 20 per cent above variable cost.