4 | oreratine costiNc Ue VAr Ne ey Vale) Ic) ating Costing is the method used to ascertain the cost of providing a service such as transport, Wiel, hospital, gas or electricity. Operating Costs denote the costs of providing a service as opposed cost of manufacturing a product, CIMA has defined operating costing as that form of operation ting which applies when Standardised services are provided either by an undertaking or by a lence cost centre within an undertaking. Cost Accounting Standard - by ICWA defines Operating "as the cost incurred in conducting a business activity. Operating costs refer to the cost of etiakings, which'do not manufacture any product but which provide services". een pPetating Costing is employed in different types of service industries such as Transport Services e.g, Truck Operator, Road Transport, Railways, Air-Line eto, 4 Municipal Services like Road Maintenance, Garbage Disposal, Street Lighting ete,156 Cost Accounting - UI (TYBAP: Sey, Supply Services such as Electricity, steam, gas, water ete Wellare Services e.g. Canteen, Hospital, Library ete, taining costs, itis n lly, Operating Costing i sary to decide suitable cost units for each type of service indy, ype of Process Costing. Thus it uses the methods of Prog. Costing when ascertaining the cost of supply of team ete, However, sometimes Opera, Costing may adopt a particular Job as a unit of cost as for example when costing a particular trp, a bus so as to quote the charges. In such cases Operating Costing uses the methods of Job Costing, | treating a specific trip as a separate job. A cost unit under operating costing may be of two typ (a) Simple cost unit; or (b) Composite cost unit. Following is the list of different cost units use, different types of service enterprises ‘SERVICE INDUSTRIES SIMPLE COST UNIT Passenger transport Per Kilometre Goods transport Per Kilometre Road Maintenance Per K. M. of Road maintained Water Supply Per Kilo Litre of Water Supplied Canteen Per Meal / Dish SERVICE INDUSTRIES COMPOSITE COST UNIT ’ Passenger transport Per Passenger - K.M. Goods transport Per Ton - K.M. Electricity Per Kilowatt - Hour Steam, Gas Per K.G. / Cubic Ft. Hospital Per Patient - Day Library Per Member - Book ; Thus it can be seen that in Operating Costing, in most cases the Cost Unit is a compound uni refersto both the Quantum of Service and Length of Service. Thus a transporter charges for ca so much weight (tons) for so much distance (Km.); an electricity company charges one for both the Quantum (Kilowatt) and the Period (Hours); and so on. Peano (1) Determine Cost Unit : The first step in Operating Costing is the determination ofthe Cost i This isa complex task as explained in Para 1.3. (2) Ascertain Costs : The next point to be noted is that Operating Costs are Period Costs. The ‘of supplying the services for a period are ascertained in the following manner (taking thee ofa transporter)- (a) Vehicle No. : Each Vehicle is treated as a cost centre and given a specific number. Al costs are accounted against this number. A separate Account is opened to record the and Income of each Vehicle. (b) Variable Costs : Variable Costs are the running and operating charges, These include ex of Variable Nature, ¢,g. petrol, diesel, lubricating oil, grease etc. The Material Requi ‘Note and Time Sheet (or Log) bears the Vehicle No, The relevant Vehicle Account is with its direct material cost and direct labour cost, Direct Expenses such as fuel are debi (©) Fixed Costs : Fixed Costs (Fixed Charges) include garage rent, indurance, road licen: ‘fc. The Fixed Charges are apportioned and absorbed by each Vehicle No. on the basis Overheads Absorption Rate which may be Actual or Pre-determined. The Fixed attributable to the Vehicle are debited to the relevant Vehicle Account. (d) Revenue: Therevenue fromn'the Vehicle is credited to the Vehicle'Account.Operating Costing 187 (©) Profit or Loss: The Vehicle Account at this stage will reveal the profit or loss made on operating that Vehicle. The profit or loss is then transferred to the Costing Profit and Loss Account, The total Operating Cost of a period is divided by the number of Cost Units (KM/ Pass eer Ton etc.) supplied during the period to arrive atthe Operating Cost Per Unit for that perio G)No Stocks : In case of a service industry, there is no question of any closing stock or work-in- progress since it is not possible to store a service for future use. (# Abnormal Costs : According to Cost Accounting Standard 5 (Transportation Costs), abnormal and non-recurring costs shall be directly debited to P & LA/c and shall not form part of operating costs. Examples are - penalty, detention charges, demurrage and costs related to abnormal break- down. CAS-5 by ICWA also states that proper records shall be maintained to determine the actual operating cast of vehicles showing details of various elements of cost, such as salaries and wages of driver, cleaner and others, cost of fuel, lubricants, grease, amortized cost of tyres and batteries, repairs and maintenance, depreciation of vehicles, distance covered and trips made, goods hauled and transported. ‘Two basic documents are normally maintained for collection of cost and operational details - viz, (@ Log book and (ii) Daily operation schedule. Same as job is assigned a distinct number in job ‘costing methiod, each vehicle is provided with a log book or log sheet, which contains all information for operation and cost control, of one particular vehicle. LOG BOOK Vehicle No. Date : Licence No. Time left garage Route No, Time retumed : Ttip record Package weight Time Out Collected | Kms. | Out In | Hours on route taken Workers time Remarks Driver : Loading delay Assistant Traffic delay Cleaner : Accident : Most of the details required for controlling the vehicles are-available from the log book, A daily Peration schedule has to be maintained by firms operating a fleet of vehicles, so as to keep control ‘Wer utilisation of each vehicle, minimising\vehicle idle hours, and also, keeping repairs cost under ‘ontrol. A system of "requisition of vehicles" may also be introduced for proper authorisation for use fvehicles. Similarly, major repairs should be undertaken after obtaining authorisation for the same,158 Cost Accounting - I (TYBAF: Sy.) BRM olsen RR ODM Tall OI Dace LY Cost Sheet For (Month/Year) VEHICLE NO. % CARRIAGE CAPACITY (Seats or Tonnes] % DAYS OPERATED y | FIXED COST Insurance Licence Fee, Permit Fee and Taxes Depreciation Other Fixed Costs (specify) VARIABLE COST Salaries and Wages of Drivers, Cleaners & Other Operating Staff Fuel and Lubricants Consumables Amortized Cost of Tyre, Tube and Battery Spares Repairs and Maintenance Other Variable Cost (specify) TOTAL OPERATION COSTS [A + B] PROFIT/LOSS REVENUE [TAKINGS] Tutorial Note : The above Cost Sheet is as prescribed in Cost Accounting Standard - 5 by ICWA which is manda wef. 1-4-2010, CAS-5 is mandatory for Cost Audits under the Companies Act and for comput Transport Cost under the Excise Act. The above cost classification is different from the tradi cost classification (used in the text-books or exam. suggested answers as on date). Hence, students should give a note below their answer that the cost classification is as per CAS ICWA which is mandatory wee.f. 1-4-2010. In most cases, the final unit cost remains the same, even ifthe classification vide CAS - 5 is diff Notes : . (J) Fixed Costs are costs of owning the vehicles. These miust be paid whether the vehicle rung&9| not. These also include office / administrative overheads. { Variable Costs are incurred to actually run a vehicle. These vary with the operations - wnea| a vehicleruns, the higher are the variable costs. (2) Effective Kilometres = Run x Load = [One way trip (Km.) x Trips per day x Days operate} | [Carriage capacity x Usage rate] 2:1 In case of passenger transport, Carriage capacity is in terms of seats; and Cost unit is E freai® kilometres per Passenger. 2.21n case of goods transport, Carriage capacity Is in terms of Tonnes; and Cost unit is Ete) kilometres per Tonne. 4 (3) Cost per Kilometre = Operation Cost + Effective Kilometres (4 Revenue (or Takings = Cost + Profit) per Kilometre = Takings + Effective Kilometres (5) Tariff to be charged per Kilometre = Takings per effective Km. + Distance of Trip Special Points + Cost of Battery, Tyres and Tubes shall be amortized over its usetul lif Depreciation is treated as fixed cost as per CAS 5, whether its useful life is mentioned int of kms. or years, Salaries of drivers and operating staffis treated as running cost, because salary will be paid if the vehicle is not n operation, Znterest is financial cost and ignored inthe cost sheet, Final Total Operating Cost remains the same whether an item is treated as Fixed ® RunninOperating Costing 159 CR lS) eS a GOL COST SHEET For (Month/Year) i STEP| COSTS z z Salaries to Staff ae xx Room Attendant Wages Repairs and Renovation Lighting and Heating Power Linen Interior Decoration Sundries Depreciation = Buildings - Fumiture and Fixtures + Air-conditioners Premises Rent Other Administration Expenses Interest on. Investment TOTAL OPERATING COST (I) NO. OF ROOM DAYS (ii) COST PER ROOM DAY (i) + (ii) bea 1.8 WORKSHEET 3 : COST SHEET [HOSPITAL] COST SHEET For (Month/Year) FIXED STANDING COSTS Salaries to Staff Premises Rent Repairs and Maintenance ‘General Administration Expenses Cost of Oxygen, X-ray, etc. Depreciation RUNNING OR VARIABLE COSTS Doctor's Fees Food Medicines Diagnostic Services Laundry Hite Charges for Extra Beds: TOTAL‘ OPERATING COST NO. OF PATIENT DAYS COST PER PATIENT DAY (C) + (D) Tan Mustration 1 : (Passenger - Kms.) From the following information calculate total Kms and total passenger'kms. JEN. of Buses 6 W4EPaye operated in the month 25 8 Made by each bus 4 stance of route 20 Kms. (one way) i pacity of Bus 40 passengers lormal passenger travelling 90% of capacity.160 Cost Accounting - II (TYBAP : Spy, ow Solution w Total Kms. Covered = Run A Distance x_| Twoways | x [No.of Trips] x Days x_[No.of Bi) 1 zoKms. | x 2 x 4 x 25 x 6 = 24,000 Kms. ~ Total Passenger - Kms. Covered = Run x Load Distance |x | Two |x| No.of |x| No.of |x] No. of |x | Maximum |x} Uses) gy Ways Trips Days Buses Capacity Capaciy| gokm. |x| 2 [x] 4 [x] 25 |x{ 6 x 40 x] 9%) © 24,000 x 86 = 8,64,000 Passenger - Kilometres Mustration 2 : (Tonne-Kms) Atruck starts with a load 10 tonnes of goods from station P. It unloads 4 tonnes at station Q and ey of the goods at station R. It reaches back directly to station P after getting reloaded with 8 tonnes goods at station R. The distance between P to Q, Q to R and then from R to P is 40 Kms., 60 k and 80 Kms. respectively. Compute (1) Absolute Tonnes-Kilometres and (2) Commercial Tonnes Kilometres. (CA Inter, May 95, M.Com., April 2013, adaptes Solution : | (1) Absolute Tonnes-Kilometre | = [10 tonnes x 40 Kms.] + [6 tonnes x 60 Kms.] © + [8 tonnes x 80 Kms.] = 1,400 Tonnes-Kilometre aie | (2) Commercial Tonnes-Kilometres Se” = Average Load x Total Kilometres Travelled 10+6+8 P a Tonnes x 180 Kms. = 1,440 Tonnes-Kms. Jn calculating Absolute Tonnes-Kms. distance between two stations is multiplied individualy with the load carried. In calculating Commercial Tonnes-Kms., the total distance covered § muttiplied with the Average load carried. | illustration 3 : (Vehicles with Different Capacities) A Transport Company maintains a fleet of vehicles for carrying goods between two places, particulas | of which are as follows —] No. of Vehicles 10 5 20 al (Capacity (in tonnes each) 2 é 5 Each vehicle makes 5 trips a day covering a distance of 10 Kms. in each trip. On an average 10% olth vehicles are laid up for repairs daily and 80% of capacity of each vehicle is actually used. Ifthe compa") | operates 25 days in a month, calculate the total torine kilometres per month carried by the company Solution : Distance 80 Km Tonnes Kms. Carried No. of Maximum Vehicles Capacity \ | = 1,35,000 Tonne-Kilometres Note; trip is assumed to cover both ways Le. to and fro.Operating Costing 161 istration 4 : (Vehicles Laid up for Repairs) city municipally arranges for the removal of its garbage by means of motor vehicle transport. The folowing vehicles are maintained No. of Vehicles Specifications 20 5 tonnes lorries 30 4 tonnes lorries, 50 3 tonnes lorries 40 2 tonnes lorries On an average each lorry makes six trips a day and in each trip covers an average distance of five km. Each lorry carries garbage weighing only 60% of its capacity. Taking an annual average, 20% of the lores are laid up for repairs every day. The garbage clearing work is carried on daily. Assuming 30 days in a month calculate the tonne km. Solution : Tonne-km. carried are ascertained as follows : 80% x 60% 80% x 60% 80% x.60% 80% x 60% Mustration 5 : (Unit Cost - Basic) ‘Atransport company maintains a fleet of lorries for carrying goods from Delhi to Panipat, 100 Kms. off. Each lorry, which operates 25 days on an average in a month, starts every day from Delhi with ‘oad of 4 tonnes and retums from Panipat with a load of 2 tonnes. Calculate the total commercial tonne-kms. and cost per commercial tonne-km. when the total monthly charges for a lorry are 27,000. What rate per tonne should the company charge if it plans to earn a gross profit of 20% on the freightage ? Solution : (1) Calculation of Tonne-Kms. From Delhi to Panipat 100 kms. x 25 days = 2,500 km, 2,500 kms. x 4 tonnes: = 10,000 tonne-kms. ‘@) Calculation of Tonne-Kms. Return from Panipat to Delhi 2.500 kms. x 2 tonnes 5,000 tonne-kms. (8) Total tonne-kms. 10,000 + 5,000 = 15,000 (4) Total Cost 27,000 % 27,000 Cost per tonne-km. = 75,g00fonne-kms. = * 1-80 £1.80 (Freight Rate pertonne = “gop, = € 2.23 Mlustration t A tuck owner provides you the following information : Capacity of truck i Distance covered each way No. of ound trips per day No.ofdays operated 25 days a month erating cost of a truck 55,000 per month meat trip freight is available to the extent of 80% capacity and on return 20% of capacity. uired : Caluate: (9) Tonne-kms per month Operating cost per tonne-km 10 tonnes. 50 kms 2162 Cost Accounting IE (TYBAE : spy (c) Rate per tonne-km per trip to be cha t of 5C eg (a) Freight eamed per outward trip (e) Freight eamed per inward tnp. Solution (a) Tonne-kms per month Outward trip tonne-kms = 2 x (90% x 10) x 50 x 2! = Inward trip tonne-kms = = 2 x (20% of 10) x 50x 25 = 255,000 27,500 (c) Rate per tonne-km = Operating cost per tonne km + Profit per tonne kim =%24%2 (ie, 50% on freight or 100% of cost) = % 4 (d) Freight earned per outward trip = (90% of 10) tonne x Sd kms x @ 4 = 7 1,800 (e) Freight earned per inward trip = (20% of 10) tonne x 50 kms x 7 4 = % 400 Mustration 7 : From the following information, calculate the (a) Effective kilometres p.a. (b) Effective pas kilometres p.a. (c) Total fuel consumption and (d) Total cost of fuel (e) Cost of fuel per kilom: (b) Operating cost per tonne-km = =%2 per tonne kr Distance of one way route 40 kilometres | Round trips per day 3 Days operated in a month 25 Seating capacity 50 passengers Seating capacity occupied 80% Fuel consumption 1 litre per 6 kms Rate of fuel 15 per itre Solution = (a) Effective kilometres = Distance covered one way x No. of trips per day x No. of days operated x No. of months operstet = 40 x (3 x 2) x 25 x 12 = 72,000 (b) Effective passenger kilometres = Effective kilometres x Seating capacity x Seating capacity occupied = 72,000 50 x 80% = 28,80,000 Distance covered 72,000 Mileage per litre 6 (d) Cost of Fuel = Fuel consumption x Rate of fuel = 12,000 x % 15 = & 1,80,000 Total Cost of Fuel 1 00 Total Distance Covered ~ 72,000 = * 2-50 per km (c) Fuel consumptior 2,000 litres (e) Cost of Fuel per kilometr Mlustration 8 : Keerti Transport Ltd. operates a fleet of lorries. The records for Lorry : L-14 reveal the followin information for September, 2011. Days maintained 30 Days operated 25 Days idle 6 Total hours operated 300 Total kms covered : 2,500 Total tonnage carried: 200 (4 tonne-load per trip, return journey empty) Total cost for the month: — & 2,70,000 Prepare a performance statement showing : ( Cost per day operated (ii) Cost per kilometre (lil) Cost per hour (iv) Cost per round-trip (v) Cost per commercial tonne-km [B.Com. (Hons.), Dethi University, 2012)nerating Costing 163 olution : otal Cost for the month & 2,70,000 (i) Cost per day operated % 2,70,000/25 days = & 10,800 %2,70,000 ww Costper km = Seay eae = 8 108 %2,70,000 (w)Cost per hour = So = € 900 %2,70,000 (u)Gost per round trip = =O _ 5,499 %2,70,000 (y Cost per commercial tonne km = —Eaga— = 854 (Working Notes : | (1, No.of trips = 200 MT + 4MT = 50 trips p.m. }{ 2. Km. per trip = 2,500 km + 50 trips = 50 km 43. Total tonne per km = 50 km x 4 tons x 25 days = 5,000 tonne-km ustration 9 = From the following information calculate the bus fare to be charged from each passenger for the jpumeys : {@) Delhito Agra (0) Delhi to Bhiwani {¢) Delhi to Chandigarh (i) Dethi to Agra 200 km Delhi to Bhiwani 120 km Delhi to Chandigarh 250 km (i) Effective passenger-km 3,72,000 {ii) Total operating costs (excluding conductor's commission @ 15% and passenger tax @ 5% of total takings) - € 1,48,800. (v)Desired profit - 30% on total takings. [B.Com. (Hons.), Dethi, 2002] Solution : - 1. Effective passenger-km = 3,72,000 2. Total Operating Cost (excluding Conductor's Commission and Passenger Tax) = 1,48,600 8. Conductor’ Commission (15% of total takings, that is, @ 2,97,600) = 44,640 (WN 2) 4. Passenger Tax (WN 2) (5% of total takings that is, 2,97,600) = 14,880 (WN 3) 5. 6. 7. - Desired Profit (30% of total takings that is, 2,97,600) = 89,280 (WN 4) Total Takings = 2,97,600 (WN 1) Effective Passenger-km = 3,72,000 2,97,600 8. Rate per Passenger-km = 375 p99 x 100 =€ 0180 Proposed fare to be charged per passenger km (2) Dethi to Agra = ® 0.80 x 200 km = € 160 (0) Dethi to Bhiwani = % 0.80 x 120 km = % 96 (©) Delhi to Chandigarh = € 0.80 x 250 km = % 200 Working Notes : 1. Conductor's Commission = 15% of Total takings Passenger's Tax'= 5% of Total takifigs Desired Profit = 30% of Total takings : Commission + Passenger Tax + Profit = 50% of Total takings Cost (Balance) (50%) Operating Cost = 1,48,800 Total takings (100%) 100% of this = 1,48,800 -2,97.600 2. Conductor's Commission = 2,97,600 x 15% = € 44,640 4. Passenger Tax = 2,97,600 x 5% = © 14,880 4 Profit = 2,97,600 x 30% = € 89,280: ts Cost Accounting - HII (TYBAF: sp My, / Mustration 10 : (Simple Cost Unit) © Mr. Sanjay owns a fleet of taxis and the following information is available from the records main, by him. . Number of taxis 10 Cost of each taxi (ef 54,600 $ Salary to Manage 2700 p.m. ; Salary to Accountant & 7500 p.m, t Salary to Cleaner \J % 200 p.m. 1 Salary to Mechanic \/ % 400 p.m ' Garage Rent 600 p.m ( ‘Annual Tax 900 per taxi ~~ [2 L Driver's Salat 7350 pertaxi “© 6 ‘Annual Repairs % 1,000 per taxi we ot q ‘ Insurance Premiunt [= 5% pa. o ( ‘otal te ofa taxis about 2,00,000 kms. A taxi runs{3,000 kme, in a month and 30% of this distr is run without any passengers. Petrol consumption i ffe for every 10 kms. @ % 4.41 perite | , il and sundry expenses are F 10.50 per 100 kms. kj NVcatcuate the cost of running a taxi por effective km. (M.Com., Mar. 04, adapteg | Solution : ‘Statement Showing Total Operating Cost Cost Sheet FIXED CHARGES Garage Rent (600 + 10) 60.00 Insurance Premium (€ 54,600 x 5% 1/12 months) 2275) Annual Tax % 900/12 months) 7500 Depreciation ‘© 54,600 x 1/2,00,000 Kms. x 3,000 Kms.) : 8190 Salary of Manager (700 + 10) 70.00 Salary of Accountant (500 + 10) 50.00 RUNNING CHARGES Driver's Salary Salary of Cleaner (200 + 10) Salary of Mechanic (400 + 10) Repairs (¥ 1,000 x 1/12 months) Petrol (3,000 Kms. x 1/10 Kms. x & 4.41) Oil and Sundry Expenses (8,000 Kms. x 1/100 Kms. x ¥ 10.5) TOTAL OPERATING COSTS Total Operating Cost Cost Per Kilometre = “Effective Kilometres Working Notes : (1) Effective Kilometres = Total Running (p.m,).- Run without Passengers 3,000 Kms. - (30% x 9,000) = 2,100 Kms. {2) The Cost Classification is as per CAS-5. Salary of operating staff (driver, cleaner and mechan*! is treated as running expenses (CAS-5). Administrative salaries (manager / accountant) @” treated as fixed costs. Mlustration 11 : (Simple & Compound Cost ee — ‘ Automobiles distributes its goods to regidnal dealer using a'singla ory. The dealer's premise km. petarapi lorry has a capacity of 10 tonnes and makes the journey twice a 44! ee ne outward joumeys and empty on retum journey. The following information © av § Four Weekly Period during the year 2001 ;Operating Costing 165 petrol Consumption Petrol Cost Cl] Driver's Wages 8 Km. per litre % 13 per litre 100 per week £400 per week Repairs % 100 per week Garage Rent * 150 per week Cost of lorry (excluding tyres) % 4,50,000 Ute of lorry 80,000 km. Insurance % 6,500 per annum Cost of tyres 6,250 Life of tyres: 25,000 km. Estimated sale value of lorry at end of its life 750,000 Vehicle Licence Cost % 1,800 per annum ‘Other overhead Cost % 41,600 per annum The lorry operates on a five day week. Required : (A)A statement to show the total cost of operating the vehicle for the four weekly period analysed into running costs and fixed costs. 18) Calculate vehicle cost per kilometre and per tonne kilometre. Solution : (M.Com., May 99, April 2011, adapted) Cost Sheet For (4 Weeks) Garage Rent (© 150 x 4 weeks) Insurance (& 6,500 / 52 weeks) x 4 weeks Licence Cost (& 1,300 / 52 weeks) x 4 weeks Other Overheads (& 41,600 / 52 wwooks) x4 weeks Depreciation (WN-4) RUNNING CHARGES Petrol Cost (WN 2) Oil Expenses Driver's Wages ® 400 x 4 weeks) Repairs (€ 100 x 4 weeks) Tyre Cost (WN 3) . s TOTAL OPERATING COSTS ~ 20;400 4,400 28,800 (8) (8) Cost Per Kilometre 0 Operating Cost / Effective Kilometres 4 % 28,800 / 3,200 Kms. = 8 9 Operating Cost / Km, - Tonnes % 28,800 / 16,000 Km. - Tonnes = & 1.80 Wb) Cost Per Kilometre -Tonne ‘Working Notes ; (l1) Effective Kilometres (8) Total distance covered by a lorry In 4 weeks = Run Distance [x | TwoWays |_x No.of Trips | x Daye 40 Km. x 2 x 2 x 4 weeks x 5 days per week = 3,200 Kms. (b) Effective Km.-Tonnes = Run x Load No. of No. of Maximum Used i] [ie [PY ie Pees La [2 [efioiomes bef son. | = 1,600 Km. x 10 al = a Km. PIree Cost Accounting - HI (TYBAF : spy, Students should note here that, on the return journey, lorry returns empty (without any hence while calculating kilometre-tonnes only one way journey (40 kms.) is considered (2) Cost of Petrol : Total distance covered by a lorry in four weeks = 3,200 km Total consumption of petrol in 4 weeks = 3,200 km. / 8 km. = 400 litres Petrol cost (for 4 weeks) = 13 x 400 litres = & 5,200 (3) Cost of Tyre : Total distance covered by a lorry in four weeks = 3,200 km. Tyre cost (for 4 weeks) = (& 6,250 x 3,200 km.) / 25,000 km. = % 800 (4) Depreciation of Lorry : Cost of Lorry = & 4,50,000 Estimated realisable value at the end of its life = ¥ $0,000 Depreciation (for 4 weeks) = (& 4,50,000 - 2 50,000) / 80,000 x 3,200 km. = € 16,000. (5) Cost classification between Fixed and Variable Costs is as per CAS - 5 Mustration 12 : Mr. A owns a bus which runs between Mumbai and Pune and back for 10 days in a month, ty distance from Mumbai to Pune is 200 Kms. The bus completes the trip from Mumbai to Pune iy, back on the same day. The bus goes another 10 days in a month to Ratnagiri and the clsta, covered being 350 kms. The trip is also completed on the same day. For the rest of 4 days itrins, the local city. Daily distance covered in local city is 100 Kms. Calculate the rate Mr. A should charge per trip from passenger when he wants to eam a prog 50% on cost. ‘The other particulars are given below Cost of Bus % 9,00,000 Depreciation 20% per annum Salary of Driver 6,000 per month Salary of Conductor 5,000 per month Salary of Accountant % 2,000 per month Diesel Consumption 6 Kms. per litre costing ¥ 8.00 per litre Tax 9,600 per annum Repairs 3,000 per month Normal capacity of the bus is 50 passengers The bus is generally occupied 90% of the capacity when it goes to Pune and 80% when it goes Ratnagiri. Itis always full when it runs within the city. (M.Com., May 96, adapted Solution : Cost Sheet For a Month Costs. _ n z FIXED CHARGES Depreciation (Cost % 9,00,000 x 20% x 1/12) Tax @ 9,600 x 1/12) Salary of Accountant RUNNING CHARGES Salary of Driver Salary of Conductor Diesel (11,400 x 1/6 x ® 8) [Note 1] Repairs ee TOTAL COST FOR MONTH [A+B] ‘Add : Profit (50% on & 47,000) an TOTAL Total Cost + Profit _ _70,500_ Rate per passenger-km. = Total Passenger-Kms. —4,60,000 ++ Charge per trip per passenger -toPune = 0.147 x 200 = © 29.40 ~ to Ratnagin = 0.147 x 350 = % 51.45 = Local = 0.147 x 100 = 8 14.70 = 70.147perating Costing 167 working Notes 1) Total Kilometres (Run) Pune 10 days x 200 km. x2 4,000 ) Ratnagiri: 10 days x 350 Km. x2 = 7,000 Local 4 days x 100 Km, 400 11,400 2) Total Number of Passengers (Load) Pune Capacity 50 x 90% Occupancy = 45 Ratnagii : Capacity 50 x 80% Occupancy 40 Local Capacity 50 x 100% Occupancy 50 {@) Effective Kilometres = Run x Load Pune 4,000 x 45 1,80,000 Ratnagiri : 7,000 x 40 2,80,000 Local 400 x 50, 20,000 = 4,80,000 (d) The Cost Classification is as per CAS - 5. tustration 13 : LP Limited is running a mini bus. You are required to calculate a suggested fare per passenger/ timetre from the following details. Purchase Price of Bus %5,00,000 Length of route 40 km % 20,000 p.a. 7 10,000 p.a. 5,000 p. % 16,000 p.a. % 4,000 p.a. % 5,000 per month 3,000 per month 24,000 pa ‘Diesel and Oil per kilometre 5 onual interest on loan 712,000 pa. Efective ite of vehicle is estimated at 5 years at the end of which it will have a scrap value of 10,000. Mini bus has 25 seats and is planned to make 5 number two-way trips for 25 days per month. Provide profit @ 20% of total revenue. (TYBAF, Nov. 2016, adapted) & FF LP Ltd. Operating Cost Sheet (Per Month) Insurance Garage Rent Road Tax Administrative Charges Depreciation (WN. 2) Interest on Loan Total Fixed Ci 8. | RUNNING CHARGES Driver Salary Conductor Salary Repairs and Maintenance (16,000 + 12)| 168 Cost Accounting - II (TYBAF: spy Repairs of Tyre-tube (4,000 + 12) 38 Diesel and Oil Cost (10,000 x 5) com Total Running Charges Cc. | TOTAL OPERATION COSTS D. | PROFIT (25% on Cost) E. | TOTAL REVENUE Rate per passenger-km = 90, 104/2,50,000 = € 0.36 Working Note : TO) Distance x Joumey x Trips x Days 10,000 km. 40 x 2 x 5 x 25 Total Passenger-km = 10,000 km x 25 = 2,50,000 passenger-km (2) Depreciation = (5,00,000 ~ 10,000)/5 = 98,000 p.a. Mustration 14 : A Mineral is transported from two mines - "A" and "B" and unloaded at plots in a Railway Stain Mine A is at a distance of 10 kms. and B is at a distance of 15 kms. from railhead plots. A flety lorries of 5 tonne carrying capacity is used for the transport of mineral from the mines. Recor, reveal that the lorries average a speed of 30 kms. per hour, when running and regularly take minutes to unload at the railhead. At mine “A” loading time averages 30 minutes per load whieg mine “B* loading time averages 20 minutes per load. Drivers’ wages, depreciation, insurance and taxes are found to cost & 9 per hour operated. Fuso tyres, repairs and maintenance cost € 1.20 per km. > Draw up a statement, showing the cost per tonne-kilometer of carrying mineral from each mine. Solution : (CA Inter, Nov. 2000, M.Com. Oct. 01, ada ‘Statement Showing the Cost per tonne-kilometer of carrying Mineral from each Mil (Drivers’ Wages, Depreciation, Insurance & Taxes) A: 1 hour 20 minutes @ % 9 per hour 8 : 1 hour 30 minutes @ & 8 per hour (Refer to Working Note 1) (Fuel, Oil, Tyres, Repairs and Maintenance) A: 20 kms. @ 71.20 perkm. B:30kms. @ % 1.20 perkm. ‘Total Cost per Trip 36 Costiper Tonne-km. z 0.72 (Refer to Working Note 2) . (& 36/50 49.508 Tonnes-kms.) | __Tonnes: Working Notes = Mine'A Mine B (1) Total operated time taken per trip Running time to & fro 40 minutes * 60 minutes . go minutes )..( 30 kms, sommes | (2050. x Solna: (x0 Sane Unloading time | 10 minutes 10 minutes Loading time 20 minutes 20 minutes Total Operated time 80 minutes or 90 minutes or J hour 20 minutes — 1 hour 30 minutes (@) Effective tonnes-kms. 50 75 (5 tonnes x 10 kms.) (6 tonnes x 15 kms)Op peraing Costing ‘oo stration 15 : ansport company maintains a fleet of bus as follows : Number of Buses Carrying Capacity 20 50 passengers each 10 40 passengers each achbus makes 5 trips a day, covering a distance of 10 Km. in each trip. On an average 80% of the «esis are occupied in each trip and 5 buses are under repair every day. Assuming that the company cgerates its fleet daily, ascertain the operating cost per passenger-Km. from the following : Wages of 30 Drivers 3,000 each per month Wages of 30 Cleaners 1,000 each per month Petrol % 20,000 per month Oi, Grease etc. % 5,000 per month Tyres, Tubes etc. % 2,000 per month Repairs % 30,000 per year "Garage Rent % 40,000 per year °E oad Licences . % 20,000 per year ; Taxes 5,000 per half year Sf Pemit Fee % 25,000 per year Salary of Operating Manager % 6,000 per month af Office Overheads % 10,000 per year Solution : (M.Com., Oct. 2000, 12, adapted) Operating Cost Sheet (For the Year) | FIXED CHARGES j Road Licences 20,000. A] | Tees 6,000 x 2) 40,000 *E | Permit Fee 25,000 Office Overheads 40,000 ig __ |Sdatyof Operating Manager (6,000 x 12) 60,000 Garage Rent 40,000 8. | RUNNING CHARGES Wages of 30 Drivers (30 x 3,000 x 12) 10,80,000 [Wages of 30 Cleaners (20 x'1,000 x 12) 3,60,000 £ | Petrol (20,000 x 12) 2,40,000 §, [Ol Grease, etc. (6,000 x 12) 60,000 nh Tyres, Tubes, etc. (2,000 x 12) 24,000 S| Repairs ve[_ 30,000 > £. |TOTAL OPERATION COSTS 19159,000, Working Notes : |, Elective Passenger-Kms. = (20 x 50) + (10 x 40) = 1,000 +'400 = 1,400 Effective Passengers 25 1,400 5 Trips x 10 Kms. x s x Jo * 965 days = 1,70,33,393 Passengers Kms. 000 * Cost Per Passenger Km. = 779,g9,ga9°7 € 0-115 + The Cost Classification is as per CAS -5. Ration 16: CEEpany presently brings coal to its factory from a nearby yard which is located 6 kms, away 10 228) and ine rate paid © 60 per fon for ansportaton. The total coal tobe handled in month Jn tons. K ecompany is considering proposal to buy its own trucks and has the option of buying either a 10 ‘oa 8 ton capacity trucks.170 Cost Accounting ME TYBAF: Sty, The following information is available Particular 10 Ton Truck | 8 Ton Tags | Purchase Price () 10,00,000) Borge Life (Years) 5 Scrap value at end of Sth year Nil wl Kms. per litre of diesel 3 " Rep/Maint p.a. per Truck (%) 60,000 aang | Other Expenses fixed p.a. (2) 60,000 36 ‘ Lubricants and Sundries per 100 ki ® 20 Each Truck will daily make 5 trips (fo and fro) on an average for 24 days in a month Cost of Diesel & 16 per litre Salary of Drivers & 3,000 per month and two drivers will be required for a Truck Other staff expenses & 1,08,000 p.a. Present a Comparative Cost Sheet on the basis of above data showing transport cost per to, operating 10 ton and 8 ton Truck at full capacity utilisation. (M.Com., Mar. 02, 2014 adapiey | Solution : | Comparative Cost Sheet (Per Month) f Panicalars SIs ‘i ul 70 Ton Truck 8 Ton Truck | ‘ RS or co so ae @_ | Perton @ | Pert | 9 Depreciation 16,667| 13.88] 13,333) 13a | “ Diesel ¢ | (1,444 kms. x 16/3) 7,680] 6.40 - |» (1,440 kms. x 16/4) - -| 5,760] 600 | * Repair & Maintenance 5,000] 4.17] 4,000} ir |p Other Expenses 5,000] 4.17) 3,000] 313 | Lubricants & Sundries i (1,440 Kms. x 20/100) 288 0.24 2e8] on * Salary to Drivers 6,000] 5.00} 6,000] 6 Other Staff Expenses 9,000] 7.50] 9,000] __oa7 49635 41.s6[ 41,381] 431 Working Notes : (1) Tons transported in a month For 10 ton truck = 24 days x 5 trips x 10 tons = 1,200 tons, For 8 ton truck = 24 days x 5 trips x 8 tons = 960 tons. (2) Kms. Travelled in a month : 24 days x 5 trips x 12 kms. (to and fro) = 1,440 kms. Mlustration 17 A State Transport Corporation has been in serious financial and operational difficulty due to tg? prices of spares, rising fuel cost and high wages. The running operational expenses have been worked out fora singlo-deck bus and are repro! below : Total fleet - 500 buses single-deck Average passengers occupying each trip : 40 List of Expenses for one year period ended 31-12-2008 : Variable Expenses : Total for 30,000 km per bus per year Fuel diesel oll 100% | Tbe and Batteries 5,00 Gil 4,500 (iv) Sy and Accessories 4,500 (v) Wages. Fringe Benefit and Bonus 28,000aperting Costing 7 ued Expenses : DF iy Road Tax 1,500 RY iirsirance 2.500 00) pent for Night Parking Garage 3.000 | tantenance Garage establishment cost 2,000 ¥ J {orginal Cost per bus 2,00,000 ty | pepeciation @ 15% p.a. on straight line basis. 2) | administrative Expenses : Total per year cy v | |.) Administrtive Establishment Cost (including salaries and PF) 13,05,000 (a) Staff Welfare Cost 57,000 «) Retirement Gratuity 50,000 Rates and Taxes 50,000 {@) Traveling and Conveyance 38,000 ij Postage, Telephone and Stationery 2,10,000 (g) Audit Fee 25,000 fn) Electricity 70,000 i) Interest and Bank Charges 2,80,000 {j Mscellaneous 40,000 ‘Administrative overhead is to be absorbed in the operating cost on the basis of available number of ‘budgeted operatable fleet (calculated on the basis of total fieet less 15% breakdown.) Yovare required to advise management regarding the fare structure on cost plus 10% basis for the ‘blowing stages of travel, assuming that the fare is charged in proportion to kilometres travelled. Minimum fare on : ‘ststage of travel 5 km {nd stage of travel 10km (rounded off to nearest paise) ‘td stage of travel 15km (M.Com., April 2010, adapted) Solution : az gs State Transport Corporation ISRe ses. Operational Expenses for the period ended 31-12-2008 \ Variable Expenses : Fuel and Diesel Tyres, Tubes and Batteries Lubricants Spare Parts and Accessories f Wages, Fringe Benefits and Bonus Fixed Expenses Road Tax Insurance Night Parking Garage Rent Maintenance Garage Establishment Cost Depreciation on ¥2,00,000 @ 15% Administration Expenses (WN) : 21,25,000 rere. 465 Total Operation Cost / Bus (1 + 2+ 3)mm Cost Accounting - II (TYBAP: Sy ‘Average Passenger per Bus = 40 3.10 Gea Per Passenger per Km = ~~ = 7.75 paise Cost per Km 7.750 paise Margin 0.775 ' Fare per Km 525 paise | ‘The fare structure will be as follows : Stage |: 5 Km x 8,525 paise = 42.625 = 43 paise Stage Il: 10 Km x 8.525 paise 5 paise Stage Ill: 15 Km x 8.255 pais 128 paise Working Note — Total PA }_ ative Establishment Cost _ 19,05,000 Staff Welfare Cost 57,000 Retirement Gratuity 50,000 Rates and Taxes a 0,000 Travelling and Conveyance 38.000 Postage, Telephone and Stationery eevee — | 2,10,000 ‘Audit Fee ae 25,000 Electricity 70,000 Interest and Bank Charges 2,80,000 Miscellaneous Total No. of Buses. Less : Breakdown Mlustration 18 : A Transport Company owns a lorry and a bus and provides you the following information. Drivers and Cleaners Salaries (per month) s 18,000 Depreciation (per annum), ” 1,80,000 1,20,000 Office Overheads (per month) 7 7,000] 7,000 Insurance (per annum) 54,000] 96,000 ‘Sundry Expenses (per month) 16,500] _ 9,500 The lorry runs 120-kms per day and carries’4 tonnes material per day. For every 100 kms it requil®s 20 fitres diese! which is purchased @ ¥ 60 per litre. : The Bus runs 80 kms. per day and carries 25 passengers per day. For every 4 kms. it require | It? petrol which is purchased @ € 80 por Ire, -Both the vehicles run for 25 days a month, You are required to calculate the total operating cost! ‘each vehicle and also ¢aloulate cost por tonne-km. for lorry and cost per passenger km. for bus Solution : (Oct. 2013, adapted Operating Cost Statement of Transport Company (Per Month)perating Costing 173 punning Cost : vrei (120 * 100 x 20 x 60 x 28) 36,000] NA (80+ 4 x 80 x25) cn NA] 40,000 total Operation Cost 7 1,02,000] 87,500 \wiation of total tonne-kms = 120 kms x 4 tonnes x 25 days = 12,000 tonnes-kms culation of total passenger-kms = 80 kms x 25 tonnes x 25 days = 50,000 passenger-kms kms = —TotalCost___1,02,000 cosipertonne KMS = TET cane-Kms ~ 42,000 = 8:5 Per tonne kms Total Cost 87,500 castper Passenger kms = Toipassenger-kms ~ 50,000 = 1-75 Per Passenger kms. wustration 19 : ‘Token Tax Lubricant Oil fepairs and Maintenance Pemit Fee Normal Capacity ‘The bus is generally occupied, 90% of the capacity when it goes to Jaipur and 80% when it goes to ‘gr. itis always full when it runs within the city. Passenger tax is 25% of the fare. Catulate the rate the company should charge a passenger when it wants to eam a profit of 33'/,% ‘Mis revenue. (ICWA-Inter, June 2015, adapted) Solution : Calculation of Passenger Kms p.m. Pass - km ‘bur Trip (10 x 540 x 50 x 90%) 2,43,000 ‘ga Trip (10 x 360 x 50 x 80%) 1,44,000 teal City (4 x 65 x 50) 13,000 ‘al Passenger kms. -4,00,000 ‘oil Distance covered In the month : Pass -kms ‘pur (10 x 270 x 2) 5,400 Ma (10x 180 x 2) 3,600 (4x65) 8,100 per quarter ‘300. per 100 kms 8,000 per month 13,050 per quarter 50_persons & | wan Transport Company operates a Luxury bus, which runs between Delhi to Jaipur and back for J 1988s in a month. The distance from Delhi to Jaipur is 270 kms. The bus completes the trip from S ] pehito Jaipur and comes back on the same day. The bus goes on a Delhi-Agra trip for 10 days yg J 2otth. The distance from Delhi to Agra is 180 kms. This trip is also completed on the same day. 3 | For4deys of its operation in a month it runs in the local city. Daily distance covered in the city is 65 3 J #38 The other information is given below : x —S, 3 f tosot Bus 15,00,000 yf Depeciation 15% per annum 4p S224 of Driver 9,000 per month f S82 of Conductor 8,000 per month pf 220! Part Time Accountant 4,500 per month 2B esurance 10,800 per quarter Fd 49 per litre i5 J Bstance covered per litre 5 kms 5 5 wAc Sooo tet Ryo Accountant eecation (15,00,000 x 15% x 1/12) "ance (10,800 / 3)a Cost Accounting - IH (TYBAF: SEM, Token Tax (8,100 / 3) e100 Permit Fees (13,050 / 3) 4,350 Total Fixed Expenses per month 50,800 Variable Expenses : 9,260 Diese! ( x 49) 90,749 300 Lubricant Oi! [2.200 x 3 27,78 Repairs and Maintenance . | _8.00 | Operating Cost per month 177.4% Profit on Net takings 33'7,% or 50% on Total Cost |_ 89.71 Total Net Takings p.m. 2.68.14 Add : 25% Passenger Tax 65.535, Total Takings p.m. 3,92,678 Rate per Passenger km = “4.55 99 =< 0.832 Charges for Jaipur per Passenger : 0.832 x 270 = % 224.64 or ¥ 225 ‘Charges for Agra per Passenger : 0.832 x 180 = € 149.76 or & 150 ‘Charges for Local city Passenger = 0.832 x 65 = € 54.08 Mustration 20 : The following were the expenses incurred by CALL and MALL Company in operating two lorties (or the conveyance of Raw Materials) and a bus (for the conveyance of Staff) during the month of February, 2006 : Drivers Salaries Cleaners Wages 60 Diesel 110 Oil 20 Repairs 100 Depreciation 350 Office Overheads 70 Servicing Charges B Road and Wheel Tax 0 Sundry Expenses 20 The above vehicles carried the following Raw materials and Passengers during the month = Lorry C 100 Tonnes of Raw Material Lorry M 120 Tonnes of Raw Material Bus 25 Passengers dally for 25 days Respective mileage of the vehicles during the month : Lory C 3,000 Lony M 4,500 Bus 2;000 ‘rom the above statistics prepare an Operating Cost Sheet in summary for the three vehicles. A/S? plain the unit of costing selected. (TYBAF, Oct. 2017, M.Com., April 06, 12, ) Solution : ‘Statement of Operating Cost per Monthperusing Casting VARIABLE EXPENSES Repairs Devers Salary Geaner’s Wages Desel a TOTAL OPERATING COSTS Total Tonnes or Passenger Miles (WN) — Cost per Tone or Passenger Mile @) 0.098 100 120 60 110 20 955 50,000 Coo '\|) imiting Note : Unit of Costing Selected qixektion of Tonne Miles per month of 25 Days .8 Tonnes, 100 Tonnes / 25 = 4 Tonnes] 120 Tonnes / 2! } ‘3000 miles / 25 = 120 4500 miles / 25 = 180 ua Teme-Miles RM. 4x25 x 120 4.8 x 180 x 25 = 12,000 tonne miles: = 21,600 tonne miles atulation of Bus Passenger Miles : Assengers camvied perday = 25 2,000 miles / 25 = 80 miles # Ss passenger miles p.m. = 25 x 80 x 25 = 50,000 Passenger miles * J eetepreneur owns a bus which runs from Mumbai to Pune and back for 25 days in a month. The | from Mumbai to Pune is 170 kms. The bus completes the trip from Mumbai to Pune and pesto the same day. Calculate the fare to be charged to passengers if a profit of 33'/,% on cost is 1,000 2,840 ‘50 passengers 20% p.a. Yetes usually runs full upto 90% ofits capacity both ways. Permit fee is payable on the cost of DUS Pipe eg _(TYBAF, Oct. 2015, M.Com, April 05, adapted) Cost Sheetmae Cone tecounting HEY: Sty B. | RUNNING CHARGES. Salary of Drivor (1,050 x 12) 12,600, Salary of Conductor (700 x 12) 8.100 Lubrication (29% 000km s € 20 20,100 ( 100 170 < 2s 28 days \ 1? month Dioso! Cost | Ty gap 1.59.3. Ropairs and Maintonanco 1000] 9 €. | TOTAL OPERATING COSTS (A 4 8) 3.08.25 D. | Total Passengors k.m. in a yoar (170 x 2 x 25 days x 12 months x 45 Persons) 45,90.009, E. | Cost per Passenger - km (C + D] 067 F, | Add : Desired Profit (1/3 on Cost) 0.0% 0.089 G. | Fare Charges = 0.089 x 170 kms L853 Mustration 22 : is €3,50,000 The company Singh Tourist service runs a tourist car on 25 Km. long route. The cost of the luxtiry The annual costs of the insurance and taxes are % 6,000 and & 7,200 respective pays € 2,000 per month as rant of the garage. The annual repair and maintenance cost is estimated at € 9,600 por annum. The car is estimated have a life of 10 years at the end of which the scrap value is likoly to be & 70,000. The monthly say of the driver is € 3,000. Other incidental running expenses amount to & 500 per month Petrol or Oil cost € 500 per 100 Km. The car makes 4 round trips every day for 25 days ona average per month. The company expects a profit of 25% on earnings, Calculate the charges per round trip. (TYBAF, Oct. 2013, M.Com, April 97, adapted) Solution : Cost Sheet sts z pm. FIXED CHARGES Garage Rent . 2,000 Insurance (& 6,000 x 1/12) : 500 Taxes (7,200 x 1/12) — 600 Depreciation (3,50,000 - 70,000 x 4/10 x 1/12) E 2.308 B. | RUNNING CHARGES Salary of Driver a 3,000 Other Incidental Expenses . 500 Petrol and Oil (2,500 x (500 100)] [Note 1] 12,500 Ropairs and Maintenance (9,600 x 1/12) 00 C. | TOTAL OPERATING COSTS 22,283 ADD : PROFIT (1/3 X 22,233) a TOTAL EARNINGS 296i 20,644 Charges Per Round Trip = |—yo9 | = 296.44 Working Notes : (1) Total kilometres run in a month = 26 days x 4 trips x 25 km. = 2,600 kms. (2) Profit is 25% on earning i. 1/4 of recelpts, So it would be 1/8 of cost. (8) Total round trips per month = 25 days x 4 trips per day = 100 nm 23 : ‘ ‘oft Co, charges © 120 per tonne for a S-tonne lorry load from A station to B station: Th charges for return trip are € 110 per tonne. In the month of July, a truck has made 10 outwal! journo} “full load out of which 3 tonnes were unloaded twice at C station on the way. It returne! without ‘pnoe.only from C station to A station, The expenses incurred were :erating Costing "7 govallited charges 38,400 ‘eval maintenance 19,200 gesly cunning charges. % 2,404 .ya1@ fequired to find the cost per tonne-kilometre (absolute) and the profit for the month of July, suming that no concession is made for delivery at the intermediate stations, anne from A station to B station is 210 kms, and from A to C station 120 kms. The truck carried jad ot 8 tonnes 5 times in the month while retuming from B station but was once caught by the sexe and was fined & 2,000. ITYBAF, Oct. 2013, B.Com. (Hons.), Dethi University, 2009) goution ¢ Cost Sheet jaca beome cuward Journey (10 trips x 5 tons x € 120), um Joumey (5 trips x 8 tons x 110) zeun Joumey (5 trips x 5 tons x € 110) Toa vass:Fine tol Monthly Receipts. cost : aed Charges (Annual) \entenance Charge (Annual) To Annual Charges Chaiges per month (57,600/12 months) uming Charges (Monthly) ‘otal Monthly Cost ‘otal Monthly Profit (Receipts less Cost) ‘oot per ton km = 7,204/23,010 = 0.31 ‘Working Note : Calculation of Tonne Km ‘Ao (120 km x 5 tons x 2 times) ‘C108 (210 - 120) Le, (90 kms x 2 tons x 2 times) ‘4 B(210 km x 5 tons x 8 times) ‘feturn Journey » 810 (90 km x 5 tons x 1 litre) #04 210 km x 5 tons x 4 times) 5A .210 km 8 tons x 5 times) Total ne a 75, kt is Thpat T transport company Is running a fleet of six buses between two towns 75,km wan, Theta capacity of each bus ls 40 passengers. The folowing particulars are available for ‘e month of April 2017. : ‘egos of Drivers, Conductors, etc: 5608 of Office and Supervisory Staff xo %ssa On, ete. age ‘and Maintenahce 6 “ee and insurance 2 Dsieciation 3,900 “est and Other Charges 3,000War 178 Cost Accounting: - HL OVBAF: Stan | if The actual passengers carried wore 80% of tho capacity. All the buses run all the days in tho rg, | gl Each bus made one round trip por day. Find out’ t per passongor kilometre. (TYBAF, Nov. 2009, adapiey | Solution: Operating Cost Sheot for the Month of April 2017 —— STANDING CHARGES [ Wages of Drivers, Conductors, etc. - 3,600 Salaries of Office and Supervisory Staff aoe 1,500 Taxes and Insurance 2,400 Interest and Other Charges 3.000} 10500 | B. RUNNING / OPERATING CHARGES Repairs and Maintenance ee see wee se 1,200 Diesel oil, etc. 10,320 Depreciation 3,900] _ 15429 |) C. TOTAL OPERATING COSTS (A + B) — 25,920 D. Total Passengers k.m. in the month 8,64,00) E. Cost per Passenger k.m. (25,920 + 8,64,000) 70.03 Note : In the absence of detalls, depreciation and fuel are treated as running charges. Working Note : Passenger kms for the month = No. of buses x Seating capacity x Capacity carried x Days in the month x kms per round trip 80 = 6x 40x 709 x 30x 75 x 2 = 8,64,000 passenger kms. Pa Mlustration 25 : both single and double rooms is expected to be 80% throughout the year of 365 days. the rent for the double room has been fixed at 125% of the rent of the single room. The costs are as-under : Variable Costs: Single rooms % 220 each per day Double rooms & 350 each per day Fixed Costs: Single rooms ¥ 120 each per day Double rooms % 250 each per day Calculate the rent chargeable for single and double rooms per day in such a way that the hotel earns an overall profit of 20% on hire charges of rooms. Solution : (TYBAF, Oct. 2017, M.Com Part - |, April 09, adapted) k 80, Single Room = 100 x 365 x 755 = 29,200 80, Double Rooms = 20 x 365 x =55 = 5,840 Room days 100 (A) Computation of Total Cost (a) Variable cost z Single Rooms (29,200 Room days x € 220) 64,24,000 | Double Rooms (6,840 Room days x € 350) 20.44.0009 | 84,88.000 (b) Fixed Cost i Single Rooms (29,200 Room days x & 120) 36,04,000 | “Double rooms (6,840 Room days x € 260) —14.60,000 “otal Cost : 4,34,32,000 (C) Profit (20% on Revenue |.9. 25% on Cost) 93,58,000 (d) Total = 1,87,90,0001 ping Costing 179 poomwise Rent ‘ gngle Rooms (29,200 x 1) 29,200 1). pyble Rooms (5,840 x 1.25) 7,300 atonal single room perday = —- 36.500 1,67,90,000 st per day per Si = Sesto sertper day per Single room = —SEEGo— = & 400 sent per day per Double room = € 400 x 1.25 = & 575, station 26 : gepunt Hotel has a capacity of 100 single rooms and 20 double rooms. It has a sports centre with ssriming pool, which is also used by persons other than residents of the hotel. The hotel has a sxo9ng arcade at the basement and a speciality restaurant atthe rooftop. The following information earlable +ywverage occupancy : 75% for 365 days of the year. A pOunent costs are : Variable Cost Fixed Cost per day per day {Sade Room 400 200 Double Room 500 250 | average sales per day of restaurant of € 1,00,000; contribution is at 30%. Fixed cost € 10,00,000 serannum. la\The sports centre/swimming pool is likely to be used by 50 non-residents daily; average contbution per day per non-resident is estimated at % 50; fixed cost is % 5,00,000 per annum. {5 4verage contribution per month from the shopping arcade is € 50,000; fixed cost is € 6,00,000 serannum. (sae required to find out : \felRent chargeable for single and double room per day, so that there is a margin of safety of 20% hire of rooms and that the rent for a double room should be kept at 120% of a single room. | @iEvauate the profitability of restaurant, sports centre and shopping arcade separately. ffition = (Mar. 03, CA-Final, Nov. 1997, adapted) ‘Statement For calculating the Rent Chargeable for Single and Double Room per day 54,75,000 | 1,64,25,000 13,68,750 | 41,06,250. dd: 20% margin of safety.on hire of room or 25% of Total Cost 51,92,812 Tolal amount of room rent to be received 2,56,64,062 ent per day of single room (in € R/O) (WN 2) (€ 2,56,64,062/93,945) 756 Rent per day of double room (in ¥ R/O) (& 756 x 1.2 times) 907 Profitability of. Restaurant : zg Total Sales per annum (365 days x % 1,00,000) 3,85,00,000 Contibution per annum (30% of Total Sales) : (A) 1,09,50,000 Fixed Cost:per arinum : (B) 10,00,000 Pelt: (A) - (By) —99,50,000 bility of Sports Centre : Contribution of Sports Centre per day : (50 persons x € 50) 2,500 Total contribution per annum (€ 2,500 x 966 days) : (A) 9,12,500 xed Cost Per annum : (8) 5,00,000 Profit: (A) - (B)] 412.500180 Cost Accounting - IT (TYBAF: SEMy, Profitability of Shopping Arcade : Contribution per annum (% 50,000 x 12 months) 8.00.00 Less : Fixed Cost 6.00.00, Profit — Mi, ‘Working Notes : (1) Single room occupancy days in a year = 100 rooms x 365 days x 75% = 27,375 Double room occupancy days in a year = 20 rooms x 365 days x 75% = 5.475 (2) In terms of single room total room occupancy days in a year 27,375 + (1.20% x 5,475) = 27,375 + 6,570 = 33,945 Mlustration 27 : New Ranjeet Hotel has three types of suites for its customers, viz. single room, double 100m ang three rooms respectively. State the rent to be charged for each type of suite on the basis ofthe following information : ()) The number of suites of each type are : (a) Single room suites 100. (b) Double room suites 30. (C) Three room suites 20. (ii) The rent of double room suite is to be fixed at 1% times the single room suite and that of three room suite as twice the single room suite. (iii) The occupancy of each type of suite is as under : Summer Winter (a) Single room suites 90% 50% (b) Double rooms suites 80% 20% (c) Three rooms suites 60% 20% (iv) The annual expenses are as follows : (a) Staff salaries % 2,20,000. {b) Room attendant’s wages when occupies Summer Winter (a) Single room suites 2 3.00 (b) Double room suites 3 24.50 (©) Three room suites 4 76.00 (©) Lighting, heating and power for full month, when occupied ! Lighting, heating Power (a) Single room suites 240, 20 (b) Double room suites 60 230 (C) Three room suites 80 z40 (d) Repairs and renovation % 42,000 Linen, etc. % 45,000 Interior decoration 50,000 ‘Sundries 31,550 (e) Depreciation : Building @ 5% on % 14,00,000. Fumiture and Fixtures @ 10% on & 1,00,000. Air conditioner @ 10% on % 2,00,000. (iv) Summer may be assumed for 7 months and.winterfor’§ months in a year. Amonth may be take” ‘as of 30 days. o (v) Profit including interest on investment @ 25% on cost. (M.Com., Mar. 04, adapte In the Books of New Ranjeet Hotel 5 Operating Cost Statement (Per annum)u ig Costing 181 27,700 ty cand Renovation 42,000 » 8 45,000 LR secoration 50,000 nes 31,550 } bine 4,080 Thos room = 600 x 6 Fini 2600 ghting, Heating ; : figle room = 2840 x 40 = 95,200 ; 11,880 ined +8320 7 V . alike 55,400ad Cost Accounting - II (TYBAP: Sy (4) Power : _ 26,400 Single room = 3 x 20 = 17,60 Double room = 5.04 Three room = in 27.7% Mlustration 28 From the following information, prepare operating cost statement for Hotel "Sea Link" and als, suggest room rent to be charged per day so that owner eams profit @ 20% on capital employeg %75,70,000 : {a) Staff salaries € 4,00,000 p.a. (b) Room attendant charges & 200 per day per room when occupied. (c) Power % 250 p.m. per room when occupied during summer and & 150 p.m. per room when occupied during winter. (d) Repairs to building % 30,000 p.a. (e) Sundries & 1,50,000 p. (f) Fumishings % 80,000 p.a. {g) Depreciate building at 10% p.a. on € 40,00,000 and furniture on & 10,00,000 at 15% p.a. There are 200 rooms in the hotel. 60% of the rooms are occupied in summer and 20% of the roons are occupied in winter. During the year, summer is 7 months and winter is of 5 months, assume 30 days of month, Solution : (M.Com., April 2013, adapted) Operating Cost Statement of Hotel Sea Link A. Fixed Cost Per Annum Staff Salaries 4,00,000 Repairs to Bi 30,000 Sundries 150,000 Fumishings 80,000 Depreciation on Building 4,00,000 Depreciation on Furniture B. Variable Costs Per Annum Room attendant charges 150,000 }12,10,000 (Summer = 200 x 60% = 120 x7 x 30 x 200) 50,40,000 (Winter = 200 x 20% = 40 x 5 x 30 x 200) 12,00,000 }62,40,000 Power (Summer = 200 x 60% = 120 x 7 x 250) 2,10,000 (Winter = 200 x 20% = 40 x 5 x 150) 30,000 | _2.40,000 }64,80,000 C. Total Operating Cost for the Year 79,90,000 ‘Add : Profit (20% on & 75,70,000) 15,14,000 Total Takings for the Year Total Occuppancy during the year : ‘Summer = 200 x 60% = 120x7x30 = 25,200 Winter = 200 x 20% = 40 x 5 x 30 8.000 Total = 31,200 Room Rent per day per room = 72,47,000 /31,200 = & 205/- Mustration 29 : (eae \ el Mr. ‘Atithi Inn which has 20 rooms and each room has maximum capacity of 4 beds. 80 pe ed ‘were fully ocoupied for the whole year and 20% of the rooms were occupied by I"? ‘customers to the extent of 50% of the room capacity, Assume a year comprises of 360 days. The following costs were incurred during the year ended 31-12-2012 : 0 [92,0400L | erating Costing he gras to Staff % 3,00,000 Ses and Taxes ® 2,95,600 9 Sreiy % 3,20.000 ciation on % wing % 1,80,000 ture % 30,000 & J ggoments % 40,000 ‘sty Expenses % 76,000 yeomattendant is paid @ & 36 per day per room when occupied. -gqdcost € 30 per customer per day. ge. | sien the amount to be charged per customer per day to cover both, accomodation and food Sa_ J .25, lus profit @ 10% retum on Capital Employed which is € 31 ,36,000. ston ¢ ‘ (M.Com., April 2013, adapted) Operating Cost Statement of Atithi Inn for the year ended 31-12-2012 & A. Fixed Cost Per Annum Staff Salaries 3,00,000 Fates and Taxes 2,95,600 Electricity 3,20,000 ‘Sundry Expenses 76,000 Depreciation on Building 1,80,000 Depreciation on Furniture '30,000 Depreciation on Equipments 40,000 }12,41,600 8 Variable Costs Per Annum Room attendant charges (20 x 360 x 36) 2,59,200 Food Cost Ld (20x 80% x 4 x 360 x 30) 691,200, a 20x 20% x 4 x 50% x 360 x 30) 86,400] 7,77,600]10,36,800 © Total Operating Cost for the Year 22,78,400 Add : Profit @ 10% on % 31,36,000 3,13,600 2._Total Takings for the Year }25,92,000 ‘wal Customer-Days for the year : 9 Mx80% x 4.x 360) + (20 x 20% x-4 x 50% x 360) = 25,920 ‘Bayes per Customer per day = 25,92,000 / 25,920 = € 100 ‘testration 30 : . ‘ReBharat Hotel has annual fixed costs applicable to rooms of & 7,50,000 for a 300 room hotel with *0e dally room rates of € 50 and average variable costs of 10 for each room rented. "shoe! operates 365 days per year. It is subject to an Income-tax rate of 40%. ‘are required to : te the number of rooms the hotel must rent to earn a net Income after tax of €.6,00,000 enereres + VeCampute the Break-even Point in terms of number of room rented. (ICWA-Final, Dee. 99, adapted) Sidtion - ‘otal Room days = No. of rooms x Days in a year = 300 rooms x 365 days = 10,95,000 rooms days Sally Contribution Required per Room = Room Rent - Variable Cost = })esied Total Revenue 50-210 =%40 6,00,000 4,00,000 Profit After Tax *ocome Tax (% 6,00,000 x 40 / 60)184 Cost Accounting - HL (TYBAF : Se My, Desired Profit Bofore Tax 10,00,009 Add : Fixed Cost 7,580,009 Total Revenue to bo earned 17.50,003 (4) No. of Room days to be rented ( 17,50,000 /¥ 40) = 43.70 Room days (6) No. of Rooms to be rented to attain break-even = ¥ 7,50,000 / % 40 = 18.750 Room days Mlustration 31 : Ashirwad hotel has 80 bedrooms with a maximum occupancy of 700 sleeper nights perweek. Aver occupancy is 80% throughout the year. Meals provided to guest have been costed and the av food cost per person per day is Breakfast & 15, Lunch & 30, Dinner & 35. Direct Wages and Staff meals per week are : Cafeteria % 6,000, Housekeeping © 3,500, Geners 3,000 Direct expenses per annum are ® 60,000 for housekeeping and € 55,000 for the Cafeteria Indirect Expenses amounts to % 4,50,000 which should be apportioned on the basis of floor area The floor area is for Bedroom 3,000 metres, Cafeteria 1,000 metres and Service area 500 metres Service comes under Cafeteria. The net profit of 20% must be made on the Cafeteria ang accommodation takings. You are required to calculate what inclusive terms per person should be charged per day. Show the split between meals and accommodation charges. (TYBAF, Nov. 2016, adaptea) Solution : Ashirwad Hospital Cost Statement Per Week Particulars, Z oe ia Meals |Aécommodation| _ Total Food Cost (560 x 80) 44,800 ~| 44.800 Direct Wages and Staff Salaries ; - Cafeteria 6,000 =| 6,000 - House Keeping - 3,500] 3.500 = General in the ratio of Direct Wages (6,000 : 3,500) 4,895 1,105] 3,000 Direct Expenses : - House Keeping (WN 2) - 4,154] 1,154 - Cafeteria (WN 2) 1,058 =| 1,058 Indirect Expenses (WN 3) 2.885 5,770 __8.655 Total Cost per week 56,638 11,529] 68,167 Profit 20% on Takings i 14,160 2,882) _ 17,082 Revenue (F/O) 70,798 14,411 | 85,209 ‘Number of Sleepers (WN 1) 560 560 560 Daily Rate per Person 126 26 182 Working Notes : 1. Capacity 700 sleeper nights per week Utilised Capacity (80%) = 560 nights per week 2. Direct Expenses = 60,000 / 52 = 1,154; 55,000 / 52 = 1,058 3. Indirect Expenses = 4,50,000 in the ratio of 3000 : 1,500 8,00,000 / 52 = §;770 A limited company operates a lodging house with a restaurant, shops and recreational facilli®S attached. Its manager has entrusted you with the planning of the coming year's operations, mo! particularly on the level of profits the company was likely to earn. ‘Jodging house has 100 double-bedroom, which are likely to be rented at € 150 per day. Th? expects an occupancy ratio of 75% for a period of 250 days during the tourist season. It'S ipated that both the beds in a room will be occupied during the period .on staying in the lodging house is expected to spend on the basis of past statistics ¢ 50 1@ shops attached to the lodge and % 60 per day in the restaurant. The recreation®!1 | ating Costing 18S | oo other relevant data available to you is as under |“ Vaable cost to volume ratio | Shops _—Restaurant 40% 30% 5% 15% 5% 10% : Forlodging house, the variable costs are € 25 per day per occupied room for cleaning, laundry, a |, pnual fixed costs for the entire complex are & 19,50,000. jonthe above, YOU are required to prepare : ,yanincome statement for the coming year; and ananalysis to indicate whether the manager's suggestion of reducing the room rent to € 125 per gay to enhance the occupancy ratio to 90% should be accepted. (CA-Final, May 1998) Estimated Income Statement for the coming year we Room Rent (100.rooms x 250 days x % 150 x 75/100) a . _ |28,12,500 | exepis from Shop (100 rooms x 2 persons x 250 days x & 30 x 75/100) 11,25,000 / ecepts from Restaurant (100 rooms x 2 persons x 250 days x € 60 x 75/100) [22,50,000 Rooms (100 rooms x 250 days x € 25 x 75/100) ps ® 11,25,000 x 50/100) fexaurant (© 22,50,000 x 55/100) 4,68,750 5,62,500 12,37,500 22,68,750 [39,18,750 19,50,000 19,68,750 Revised estimated Income statement or the coming year (if room rent reduced to € 125 Per day to enhance occupancy to 90%) Room Rent '(100 rooms x 250 days x € 125 x 90/100) se aie |28,12,500 Sits from Shop (100 rooms x 2 persons x 250 days x € 40 x 90/100) 13,50,000 ‘rom Restaurant (100 rooms x 2 persons x'250 days x © 60 x 90/100) 127,00,000 (a) [68,62,500 fable Cost ‘8+! Rooms (100 rooms x 250 days x ¥ 26 x 90/100) 5,62,500 ps & 13,50,000 x 50/100) 6,75,000 etaurant (@ 27,00,000 x 55/100) lo) otibution (a - b) | 58 Fixed Costs’ ted Profit Palyeis : With the reduction in room rent from & 150/per:day to %125 the occupancy will increase '% which will result in increase of profit by € 2,21,260 (.2., & 21,90,000 -%.19,68,750). i:6 Cost Accounting - III (TYBAF : Mlustration 33 : SEM), Care Hospital operates a fitness center to provide counselling on nutrition, exercise and health care for major surgery patients alter their release from the hospital. Average patient will make three visi to the center. Each visit lasts 40 minutes. The hospital has estimated the following costs of operating the center a }—— Occupancy costs per month 18,009 Clerical costs per month 12,000 Other costs per month 4,000 Medication charges per patient 44 Records charge per patient 6 Staffing cost per visit . 9 Computer record update per visit Hospital expects ot have an average of 500 visits per month. What should be the amount charges to each patient in order to cover the above costs ? Solution Suis OE ay Sa ea & z Indirect cost per month Occupancy 18,000 Clerical : 12,000 Other costs 4,000 34,000 A. Indirect costs per visit (® 34,000 + 500) Staffing cost per visit Computer record update per visit Total cost per visit Visits per patient B. Total cost per patient Records charge per patient Medication change per patient C. Total average cost per patient D._Or per patient = € 60 plus % 80 per visit Ilustration 34 : ‘A Hospital is run by a Company. For this purpose it has hired a buildir month plus it would bear the repair charges also. The hospital is having 25 beds and 5 more beds can be accommodated when the need arises. The staff of the hospital is as follows : 2 Supervisors each at a salary of € 500 per month; 4 Nurses | each ata salary of € 300 per month; 2 Ward boys, each at a salary of & 150 per month Although the hospital is open for patients all the 365 days in a year, records for the year 2004 disclose that only for 120 days in the year, the unit had the full capacity of 25 patients per day and for another 80 days, it had on an average 20 beds only occupied per day. But there were occasions when the beds were full, extra beds were hired at a charge of & 5 per bed per day and this did not come to more than 5 beds extra above the normal capacity on any one day. The total hire charges for the extra beds incurred for the whole year were & 2,000. The Unit engaged expert doctors from outside to attend on the patients and the fees was paid of the basis of the number of patients attended and time spent by them which on an average worked ‘out to % 10,000 per month in 2004. ‘The other expenses for the year were as under : thelee 9 at a rent of & 5,000 per Repair and Maintenance % 3,600 Food supplied to patients 44,000 Sanitaty and Other services for patients % 12,600 Laundry of % 28,000 Medicines supplied 35,000erating Costing 187 gaiol onygen, X-ray, etc. other than directly bome for treatment of patients % 54,000. gereral Administration Charges allocated to hospital & 49,550 snenospital recovered an amount of € 100 per day on an average from each patient, compute the otter patient - day made by the hospital as per operating cost sheet for the year 2004, seution : (M.Com., Oct. 06, adaptea Statement of Profit a SS an fnable Cost Food 44,000 Sanitary Services 12,500 Laundry 28,000 Medicines 95,000 Doctor's Fee (10,000 x 12) 1,20,000 Hire Charges for Extra Bed 2,000| 2,41,500 ‘pntrbution 2,58,500 ss: Fired Costs Salaries [(2 x © 00) + (4 x % 300) + (2.x € 150)] x 12 30,000 Rent (© 5,000 x 12) i 60,000 Repairs and Maintenance 3,600 General Administration 49,550 Cost of Oxygen, X-ray etc. ee 54,000| 1,97,150 Total 61,350 61,350 : atient-day = = froftPer P fey ea Tet joie : Number of patient-days in 2001 Patient-days 25 beds x 120 days 3,000 20 beds x 80 days 1,600 Extra bed - days (total hire charges of extra beds/charges per bed per day = € 2,000/% 5) —400 —5,000 'sassumed in the solution given above the cost of sanitary and other services is variable on the /=sunption that they are related to no. of patient-days. On the other hand, cost of oxygen, X-rays have been taken as fixed cost since it has been stated that this cost is other than costs directly 7 for treatment of patients.188 Cost Accounting - I (TYBAP: SEMy OUTLINE Questions ye Questions | | (1) Explain Operating Costing and types of undertaking in which Operating Cost System wouldts [Ans.: Refer Para | suitable: (2) Explain Operation Costing. [Ans.: Refer Para) (3) What statistics should a Transport Operating Company keep in respect of each vehicle to get correct operational and maintenance costs ? [Ans.: Refer Para 15 (4) Explain Composite Cost Unit. [Ans.: Refer Para 4 (6) State main features of Hospital costing. [Ans.: Refer Para 14 CRM eae also) 44.4 Conceptual 1. Passenger transport (a) Per Passenger - Seat AS Per Passenger - K.M. (c) Per Passenger - Day (d) Per Passenger - Hour 2. Goods transport {a) Per Ton - Day (b) Per Ton - Trip (c) Per Ton - Hour ddpPer Ton - K.M. Elegtricity Undertaking afer Kilowatt - Hour (b) Per Consumer - Hour (c) Per Consumer - Points (d) Per K.G. / Cubic Ft. Effective Kilometres ‘un x Load way trip (Km.) x Trips per day x Days operated fage caphlty x Usage rate (d) is x Distance of Tripynating Costing 189 Costing is the method used to ascertain the cost of providing a service such as jansport, hotel, (a) Operation i) Process operating Costing uses the methods of electricity, steam ete. a) Operation Process ‘Qperating Costing uses the methods of tyabus remes hospital, gas or electricity. {by Operating (d) Job Costing when ascertaining the cost of supply (b) Marginal (6) Job Costing when when costing a particular trip (b) Standard “dyJob ict ‘passenger transport, Carriage capacity is in terms of (b) tonnes kM (a) cc jx Incase of goods transport, Carriage capacity is in terms of (a)seats ~byTonnes (ales (cc Which of the following would be classified as a fixed cost in the: “peration of a motor vehicle? {a}Qil change every 10,000 kilometres insurance (b) Petro! (d) Tyre replacesment 1. Which of the following would be regarded asa variable cost |in the exnnual operation of a. moto: vehicle? {a)$Ire purchase payments Petrol 1412 Numerical MCQs (b) Insurance (d) Tyre repleice ment /2 From the following particulars, calculate the cost-unit. Distance (KM) 10 ‘io. of Trips to and fro 5 ‘No.of Days of operation ina month 25 No. of Vehicles-Total 10 Capacity of each vehicle in tonnes 2 : No.of Vehicles-laid up for repiars daily 10% Capacity of vehicles actually used 80% ‘22,000 (b) 22,500 (6) 18,000 (d) 21,600 From the following particulars, calculate the cost-unit. Dstance (KM) 10 No.of Trips to and fro 5 % No, of Days of operation in a month 25 Yo of Vehicles-Total 5 Capacity of each vehicle in tonnes 6 ‘io of Vehicles-laid up for repiars daily 10% of vehicles actually used 80% 3,000 (b) 33,750 127,000. (d) 32,400 From the following particulars, calculate the cost-unit, (km) 10 No.of Trips to and fro & No. of Days of operation in a month 25 'o.of Vehicles-Total be ity of each vehicle in tonnes 5 ‘No.of Vehicles-aid up for repiars dally oe ity of vehicles actually used190 Cost Accounting HH (TYBAF: SEM.y, (a) 10,000 (b) 1,12,500 (c) 90,000 (d) 1,08,000 15. There are 100 rooms in the hotel. 80% of the rooms are generally occupied in summer and 3, in winter. The period of summer and winter may be considered to be of 6 months in each case | ‘Amonth may be assumed to be 30 days. Wages of the room attendant & 20 per day. There ig, room attendant for each room. He is paid wages when the room is occupied. Room attenday, wages for summer are (@) 2,88,000 (b) 3,60,000 (c) 1,08,000 (a) 72,000 16. There are 100 rooms in the hotel. 80% of the rooms are generally occupied in summer and 3 in winter. The period of summer and winter may be considered to be of 6 months in each cage A month may be assumed to be 30 days. Wages of the room attendant @ 20 per day. There is room attendant for each room. He is paid wages when the room is occupied. Room attendan, wages for winter are (a) 2,88,000 (b) 3,60,000 | (c) 1.08,000 (d) 72,000 17.A hospital is havirly 25 beds. For 120 days in the year, it had the full capacity of 25 patients per day and for another 20 days, it had on an average 20 beds only occupied per day. Year is taken as 360 days. The costunit is (a) 9000 Patient Days. (b) 4600 Patient Days (c) 200 Patient Days (@) 45 Pationt Beds 1, The cost unit of transport tusiness with a single vehicle is tonne/kilometre. Total costs were ‘¥ 4,558 in a week during which the following joumeys were made dourney Load (tonnes) Distance (kms) 1 5 80 2 7 100 3 3 40 4 5 60 5 4 150 What was the cost per tonne/kilomere in the week ? (a) 0.44 (b) 22.15 (©) 10.60 () 8 57.57 19.A hotel has 60 available rooms. Room occupancy was 80% during a 90 day period during which total costs incurred were @ 1,04,976. ‘What was the cost per occupied room per night in the period 7 (a) 12.44 (b) 8 15.55 (©) % 19.44 (@) & 24.30 CF ee ant Costing is the method used to ascertain the cost of providing a service such a8 transport, hotel, hospital, gas or electricity. costing applies when standardised services are provided either by an undertaking oF by a service cost centre within an undertaking. 3. Operating Costing uses the methods of the cost of supply of electricity, steam etc. 4. Operating Costing uses the methods of, particular trip by a bus. 5. In Road Maintenance Industry, Per K. M. of Road maintained is a cost unit. 6. In Water Supply Industry, Per Kilo Litre of Water Supplied is a cost unit. 7 For a hospital, the composite cost unit is 8, Fora Passenger transport , the composite cost unit is 9. Fofa Goods transport , the composite cost unit is 10. ‘Cost Unit refers to both the __of Service and 11. In ca86.0f passenger transpor,, Carriage capacity is in terms of 12, In case of transport, Carriage capacity is in terms of Tonnes. 2. (Process/Job) Costing when certaining (Process/Job) Costing when when costing a (simple/composite) (simple/composite) of Service.ving Costing , (PTT TERT a a COLUMN A COLUMN B & |! Passenger transport (@) Per Kilowatt - Hour "| |5 Goods transport (b) Per Patient - Day Ja. Electricity (c)_ Per Passenger - K.M ja Steam, Gas (a) Per Member - Book x | |5. Hospital (e) PerK.G. / Cubic Ft 2 Library () Per Ton-K.M. COLUMN A COLUMN B 4, Effective Kilometres. (a) Operation Cost + Etfective Kilometres 2, Run (b) Run x Load aig | 3. Load (c) Takings per effective Km. + Distance ni] |4 Cost per Kilometre of Trip 5. Revenue per Kilometre (d) Takings + Effective Kilometres 6, Tarif to be charged per Kilometre (e) One way trip (Km.) x Trips per day x Days operated e () Carriage capacity x Usage rate STATE WHETHER TRUE OR FALSE Operation costing is a form of operating costing } incase of a service industry, the closing stock or work-in-progress is always valued at labour cost | Standard costing is used when standardised services are provided either by an undertaking or tya service cost centre within an undertaking. Operating Costing uses the methods of Job Costing when ascertaining the cost of supply of ebectcity, steam etc. | Operating Costing uses the methods of Process Costing when when costing a particular trip by aus, Road Maintenance Industry, Per K. M. of Road maintained is a composite cost unit. Pn Water Supply Industry, Per Kilo Litre of Water Supplied is a simple cost unit. Fora hospital, the composite cost unit is Room-Day. } Fora Passenger transport , the composite cost unit is KM-Hours. Fora Goods transport, the composite cost unit is Trips-Hours. | case of passenger transport, Carriage capacity is in terms of weight. #case of goods transport, Carriage capacity is in terms of cubic foot. 10, (d) | 13. (©) 16. (c) 19. (a) 1. © 14. (ce) 17. (b) 12. (c) 18. (a) 18. (b) ir ess (4) Job (5) Simple (6) Simple (7) Patient-Day"(8) Habra emai) raoe OS ee Sei oe AZ (1) ~(€), (2) = (), (@) ~ (@), (4) ~ (€), (8) - (©), (6) - (0) Bz (1) - (b), (2) -(€), () - (4) - (@), (©) - 4), ©) - (0) Thue :7 False : 1,2, 3, 4,5, 6, 8,9, 10, 11, 12 ‘also; Operating costing is a form of operation costing. Faise:in case of a service industry, there is No question of any closing stock or work-in-progress ce itis not possible to store a service for future use.