11cma-service or operating costing
TRANSCRIPT
-:: Learning Objectives ::-1. Understand the Meaning of Operating or Service Costing.
2. Ascertain the Cost per unit of Service Costing.
3. Identify the Cost data with respect to Operating Cost.
4. Compute Cost relating to different types of Industries
using Operating Costing or Service Costing such as
Transport Costing
Canteen Costing
Power House Costing
Hospital Costing
Definition of Service CostingCIMA (Chartered Institute of Management
Accountants) defines Service Costing as
“Cost accounting for Services or Functions ( e.g. Canteen, Maintenance, Personnel ). These may be referred to as Service Centers, Departments or Functions”
Features of Service Costing1. Cost Classification::- Costs are classified into Variable or
Fixed.
2. Periodical ascertainment of Costs::- Cost ascertained periodically, generally
at the end of specific periods.
3. Cost Differs ::- As service organizations provide a wide
variety of services, it is difficult to provide a common cost units. It differs from organization to organization.
Applications of Service CostingService Organizations Internal Services
Organizations that are engaged in the business of rendering service to outsiders to earn profit are called Service Organizations.
Example:- Power Generation Transport Firms Hotels
Departments within organizations render services to the production as well as other departments.
Example:- Hospitals Canteen Boiler- House
Cost Units ::-Nature of Business Cost Unit
Goods Transport Per Tonne – Kilometer
Passenger Transport Per Passenger – Kilometer
Hotels Per Room
Canteens Per Meal
Hospitals Per Patients Day
Electricity Supply Per Kilowatt Hour
Water Supply Per 1000 gallons
Road Lighting Per Lamp
Educational Institutes Per Full time Students
Special Terminologies Used In Service Costing
Fixed or Standing Charges.
Variable or Running Charges.
Semi-Fixed or Maintenance
Charges
Which are related to period and these are to be incurred whether service is provided or not.
E.g.- Insurance ChargesTaxesGarage rentOffice expenses
these charges relates to use of machine . More the use more the expenses, Lesser the use lesser are the expenses.
E.g. – Petrol, Diesel, Electricity , Wages of Drivers , Depreciation etc.
all the expenses which are incurred to keep the machine or vehicle or the establishments etc in a proper order or in working condition.
E.g. – Repair, Oiling, Replacement of Tyres or tubes etc
Objectives of a Transport CostingTo ascertain the Operating cost of running a
vehicle per Km or Mile.
To fix the rates of carriage of goods or passengers on the basis of operating cost.
To fix the hire charges where vehicles are given on hire.
To compare the cost of using own vehicle with that of using alternative mode of transport.
To determine what should be charged to departments which use internal transport facility.
The Proforma operating Cost Sheet of a Transport Company
Particulars of Expenditure
Per Unit Rs. Rs.
( A ) Fixed CostsManager’s Salary
Accountant’s SalaryDriver’s Salary
Cleaner’s SalaryGarage mechanic Salary
Administrative OverheadsGarage Rent
Insurance PremiumRoad Tax & Permit Fee
DepreciationInterest
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
TOTAL ( A ) XXX XXX
The Proforma operating Cost Sheet of a Transport Company (Cont.)
Particulars of Expenditure
Per Unit Rs. Rs.
( B ) Running Expenses
Petrol / DieselLubricating oil and other Sundries
Tyres and TubesSpares
Repairs and MaintenanceDriver’s Wages
Cleaner’s Wages
xxxxxxxxxxxxxxxxxxXxx
xxxxxxxxxxxxxxxxxxxxx
TOTAL ( B ) XXX XXX
The Proforma operating Cost Sheet of a Transport Company (Cont.)
ABC Motor Transport Ltd.
Operating Cost Sheet for the Month of ……..
Vehicle No.: XXX No. of Trips : XXXX Distance Travelled
Particulars of Expenditure Per Unit Rs. Rs.
Total Operating Cost ( A + B )
XXXX XXXX
Example on a Transport CompanyFrom the following calculate the cost per mile of a vehicle
ParticularsRs.
Value of Vehicle 15,000
Road License for the Year 500
Insurance charge per Year 100
Garage rent per Year 600
Driver’s wages per Month 200
Cost of Petrol per litre 0.8
Example on a Transport Company cont.
From the following calculate the cost per mile of a vehicle
Ignore interest on Capital
ParticularsRs.
Miles per Litre 8
Maintenance per mile 0.2
Estimated Life 1,50,000 miles
Estimated annual mileage 6,000 miles
Example on a Transport Company cont.
Working Notes ::-
1.Depreciation p.a.= ( Rs.15,000 / 1,50,000 miles )X 6,000 miles
2.Cost of Petrol per Mile = Rs. 0.8 / 8 miles = Rs. 0.1
Particulars of Expenditure
Total Cost p.a.
Cost per Mile
( A ) Fixed Expenses
DepreciationRoad Licence FeeInsurance Charge
Garage rentDriver’s Salary
600500100600
2,400
TOTAL ( A ) 4200 0.70
Example on a Transport Company cont.
Particulars of Expenditure
Total Cost p.a.
Cost per Mile
( B ) Variable Expenses :-
Petrol
Tyre and Maintenance
0.10.2
Operating Cost of Vehicle per Mile
1.00
Canteen Costing The Expenses are generally divided into the
following Heads
Food Provision Cost
Labour & Supervision Cost
Maintenance Cost
Administration Cost
The Proforma operating Cost Sheet of Canteen FirmParticulars of Expenditure Amount Rs.
( A ) Food Provision Cost
Tea / Coffee
Biscuits
Milk
Eggs / Meat / Fish
Vegetables
Beverages
Fruits
xxx / xxx
xxx
xxx
xxx/ xxx / xxx
xxx
xxx
Xxx
TOTAL ( A ) XXX
The Proforma operating Cost Sheet of Canteen Firm (Cont.)
Particulars of Expenditure Amount Rs.
( B ) Labour & Supervision Cost
Supervisor’s Salary
Cooks Salary
Helpers Salary
Cleaners Salary
Sweepers Salary
xxx
xxx
xxx
xxx
xxx
TOTAL ( B ) XXX
The Proforma operating Cost Sheet of Canteen Firm (Cont.)
Particulars of Expenditure Amount Rs.
( C ) Maintenance Cost
Crockery / Cutlery
Cleaning Materials
Towels
Consumable Stores
Gas
xxx
xxx
xxx
xxx
xxx
TOTAL ( C ) XXX
The Proforma operating Cost Sheet of Canteen Firm (Cont.)
Particulars of Expenditure Amount Rs.
( D ) Administration Cost
Management Salaries
Rent
Insurance
Repairs and Maintenance
Other Administrative Expenses
xxx
xxx
xxx
xxx
xxx
TOTAL ( D ) XXX
The Proforma operating Cost Sheet of Canteen Firm (Cont.)
Particulars of Expenditure Amount Rs.
( I ) Total Operating Cost ( A + B + C + D )
XXX
( II ) No. of Meals Served XXX
Cost per Meal Served ( I ) / ( II )
XXXXX
Monthly Statement of Canteen Cost
Particulars of Expenditure This Month Rs.
This Month
Last Year Rs.
Material Consumed XXX XXX
Labour & Supervision Cost XXX XXX
Other Overheads XXX XXX
TOTAL COST ( A) XXXXX XXXXX
Less Thr’ Coupons ( B ) XXX XXX
Subsidiary given By Company ( C= A- B )
XXXXX XXXXX
No. of Employees Served ( D ) XXX XXX
Cost per Employee ( C ) / ( D) Rs. XX XX
Example on Canteen CostingFrom the following calculate the increase in
subsidy per Head this month in the same month last year.
ParticularsThis
Month This
Month Last Year
No. of Employees 4,000 3,500
Sales Realization thr’ Coupons
35,000 30,000
Material Consumed 50,000 30,000
Labour & Supervision 30,000 22,000
Overheads 39,000 34,000
Comparative Cost Sheet of a Canteen
Particulars This Month
This Month Last Year
Material Consumed 50,000 30,000Labour & Supervision 30,000 22,000Overheads 39,000 34,000
TOTAL COST ( A ) 1,19,000 86,000Less Sale Thr’ Coupon ( B ) 35,000 30,000Subsidy Provided by Company ( A) – ( B )
84,000 56,000
No. of Employees 4,000 3,500Subsidy for Each Employee 21 16
So increase in subsidy by company is Rs. 5 per Head
Objectives of Power House CostingTo ascertain the Operating cost of generating
Electricity.
To fix the rates of electricity to be charged to various departments using electricity.
To compare the cost of generating electricity with that of using alternative mode of generating electricity.
The Proforma operating Cost Sheet of a Power House CostingSteam Produced :- Steam Used for Generation :-Units of Electricity Generated :-
Particulars Total Cost Cost Per Unit
Current YearRs.
Previous YearRs.
Current YearRs.
Previous Year
Rs.
( A ) Steam Generation Cost
CoalLabourWater
Repairs and MaintenanceSupervision
Fixed OverheadsTotal Cost of Steam
GenerationLess :- Allocated to Heating
Cost of Steam utilized for Electricity Generation
The Proforma operating Cost Sheet of a Power House Costing
Steam Produced :- Steam Used for Generation :-Units of Electricity Generated :-
Particulars Total Cost Cost Per Unit
Current YearRs.
Previous YearRs.
Current YearRs.
Previous Year
Rs.
(B) Electricity Generation Cost
Cost of Steam UsedStoresWages
Depreciation Repairs & Maintenance
Supervision
Total Cost
The Proforma operating Cost Sheet of a Hospital Firm
Particulars of Expenditure Amount Rs.
( A ) Fixed Costs Salaries to Staff
Premises RentRepairs and Maintenance
General Administrative Expenses Cost of Oxygen , X-ray etc.
Depreciation
xxxxxxxxxxxxxxxxxx
TOTAL ( A ) xxx
The Proforma operating Cost Sheet of a Hospital Firm (Cont.)
Particulars of Expenditure Amount Rs.
( B ) Variable CostsDoctor’s Fees
FoodMedicines
Diagnostic ServicesLaundry
Hire Charges for Extra Beds
xxxxxxxxxxxxxxxxxx
TOTAL ( B ) xxx
The Proforma operating Cost Sheet of a Hospital Firm (Cont.)
Particulars of Expenditure Amount Rs.
( I ) Total Operating Cost ( A + B )
XXX
( II ) No. of Patient Days XXX
Cost per Patient Day ( I ) / ( II )
XXXXX
Quick RecapObjective of Operating or Service CostingDefinition of Operating or Service CostingCost UnitsSpecial Terminologies Used In Service Costing
as Fixed Charges ,Variable Charges, Maintenance Charges
Some of Service Industries, Objective and Proforma of Transport Costing with
ExampleCanteen Costing with
ExamplePower House CostingHospital Costing
Reference BooksCost Accounting by Jawahar Lal & Srivastava.
Cost Accounting by Ravi Kishore.
Cost Accounting by Gupta, Sharma, Ahuja.
Cost Accounting by Tulsian
Cost Accounting : Principles & Practice by
Dutta