Professional Documents
Culture Documents
By:
Akrit Kashyap-25
Shreyansh Kejriwal-26
Ambarish Kulkarni-27
Devashree Kumar-28
Snehil Kumar-29
Pallawi Kumari-30
What is operating costing?
• Operating costing method is one designed to ascertain
and control the costs of the undertakings which do not
produce products but which render services
• Also known as service costing
• Operation costing is the cost of rendering services
• It is the cost of producing and maintaining a service
• Industries using operating costing do not produce
tangible poducts ; but useful service is rendered; for
eg-transport services, utility services like hospitals,
canteens etc, distribution services like supply of
electricity, gas etc.
Service Costing
Service or operating cost is the cost of providing service. The
term service costing is applied to describe the system used to
find the cost of performing a service such as transport, gas or
electricity.
• Services rendered to customers are of unique and
standardised type
• Distinction between fixed cost and variable cost is of special
importance as the scale of operations considerably affects the
cost per unit of service rendered
• A large chunk of total capital invested in fixed assets and
relatively less working capital is required
• The method of costing is different from that used in connection
with production and difference lies mainly in the manner of
accumulating the cost data and finally in its allocation to cost
units
Cost Unit-Selection of cost unit is
different in operating costing
NAME OF THE COST UNIT
SNO UNDERTAKING
1 Passenger transport Passenger km/mile
2 Goods transport Ton mile/km
3 Hotel lodging Per bed, per person, per day
4 Per bed, per day, per operations, per patient,
Hospitals per test, per x-ray etc.
5 Electricity Kilowatt-hour
6 Boiler house Kilograms of streams supplied
7 Cinema theatre Man-show
8 Canteens Meals served, cups of tea sold
9 Gas works Per 100 cubic ft produced
10 Water supply Per 1000 gallons
Classification of Costs
1.Fixed costs or standing charges
2.Semi-variable costs or manufacturing charges
3.Variable costs or operating-running charges
Characteristics
These undertakings render unique services to their
customers
They invest large proportion of their capital in fixed
assets
The requirement of working capital comparatively is less
The operating cost is divided into fixed and variable and
they are of utmost importance
TRANSPORT COSTING
Objective of Transport Costing
Ascertaining the rates of carriage of good/passengers on the basis of operating costs
Ascertaining the price at which the vehicle should be hired out
Comparing the cost of using own motor vehicles and that of using alternative forms
of transport
Ascertaining what should be charged against the departments , or others, using the
service
Cost Unit
1. Absolute (Weighted Average) tonnes-kms: The sum total of tonnes-kms., arrived
at by multiplying various distances by respective load quantities carried
Absolute Tonne Km = Dist1 x Qty1 + Dist2 x Qty2
RS.
Coal consumed 4,20,000
Labour cost 72,000
Water and softening charges 24,000
Electricity 12,000
Works and admin overheads 40,000
Miscellaneous overheads 20,000
Capital invested 4,00,000
=(33.06*1.5*15,00,000)/2,205 = Rs.33,734(Approax)
OPERATION COST OF A MOVIE THEATRE
Salaries
1 Manager Rs800 P.M
10 Gate Keepers Rs200 P.M
2 Operators Rs 400 P.M
4 Clerks Rs 250 P.M
Electricity and Oil Rs 11,655
Carbon Rs 7,235
Miscellaneous Expense Rs 5,425
Advertisement Rs 34,710
Admin. Expense Rs18,000
Hire of Print Rs 1,40,700
Premise value is Rs.6,00,000 and that of Projector is Rs.3,20,000 and it
suffers a depreciation of 10% .
Seating capacity :- 1) Class 1 –250 Seats
2) Class 2 – 250 Seats
3) Class 3– 125 Seats
Finding cost per man assuming 20% of seats remain
vacant
Finding rates of each class for 30% returns on
gross proceeds and weightage ratio of classes is
take as 1:2:3
COSTING OF EDUCATIONAL
INSTITUTIONS
• It’s a type of costing that involves determining the per
student cost that is to be charged.
• Due to varying students, lot of factors have to kept
dynamic and based on which total cost is to be
determined.
PROBLEM
Prepare statement showing the expenses of operating a
single bus and the fleet of 25 buses for a year.
Work out average cost per students per month in respect
of:
Students coming from a distance of up to 4 kms.
Students coming from a distance of up to 8 kms.
Students coming from a distance of up to 16 kms.
HOSPITAL Costing
Key Points
•Relating costs to services billed to patients.
Fixed Costs:
Salaries:
Nurses 72,000
1 Total Cost Rs
A Staff Salaries 80,000