Operating Costing

Operating Costing

Contents

1. It is a method of costing

2. Used in service sector

3. To know the cost and profit of service

4. Service sector includes : ▪ Transport, Education, Hospital, Software, ▪ B.P.O, Insurance, Banking, Electricity, ▪ Cinema, Hotel, Canteen, Circus, ▪ D2H , Telecom, Internet, ▪ Tourism, Library, Gas,

Meaning of Operating costing method :

The term transport includes all modes of transport like air, water, rail and road. However, the present discussion is confined to road transport only. Road transport includes both passenger transport and goods transport. It renders services of carrying goods and passenger from and to the places, goods and passengers may be caried out by truck, buses, tempos and taxis, etc. In this costing, cost per unit is calculated in term of running kilometers of passenger kilometers or ton kilometers. Some institution do not produce goods but provide services to customer. The process of calculating the total cost and per unit cost on the basis of amount spent by such institution on providing services and then determining per unit selling price on this basis, is known as ‘operating costing’ or ‘service costing’. The amount spent by such institution for providing services is known as operating cost or service cost.

Objectives of Operating Costing :

1. Finding out the cost of operating the vehicles and determine the prices to be charged for the usage of service by customers.

2. To determine the profitability of vehicles taken on hire.

3. To compare the cost of using own motor vehicles and that of using others forms of transport.

4. To rind out profitability of various route.

5. To compare own cost with the costs of other competitors.

6. Ensuring that repairs and maintenance expenditure of the vehicles is under control.

Transport costing : Transport costing can be divided under Two heading as follows

(1) Passenger transport

(2) Goods transport

Passenger transport : Passenger transport is divided into three parts:-

(1) Bus transport

(2) Railways

(3) Airlines

Types of cost :  It can be classified as follows :

a) Fixed cost or standing charges

b) Variable cost or running charges

Statement showing operating cost

Statement showing total operating cost

Formula : Depreciation per annum and Depreciation per Kilometer

Goods Transport : transport is divided into three parts:-

(1) Absolute ton km

(2) Commercial ton km

Formula : Absolute ton Km and Commercial ton Km

Operating Costing In Advance

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What you will learn

• Operating Costing
• Meaning of Operating costing method
• Introduction of Operating costing method

Rating: 0

Level: All Levels

Duration: 3 hours

Instructor: Dr. Mohd Saifi Anwar