WHAT IS OPERATION COSTING
Service costing is “A cost accounting method concerned with establishing the costs of services rendered”. Service costing is also applied within a manufacturing setting.
The Differences Between Product Costing and Service Costing?
• There may be very few, if any, materials to worry about
• Overheads will comprise the most significant portion of any costs of which, labour costs may well comprise as much as 70%
No. Enterprise Cost per unit
1. Railways or bus companies Per passenger-kilometer
2. Hospital Per patient/day, per bed/day
3. Canteen Meals served , cups of tea
4. Water supply service Per 1000 gallons
5. Boiler House 1000 kg of steam
6. Goods Transport Per tonne km, quintal km
7. Electricity Boards Per kilowatt – hours
8. Road maintenance department Per mile or road maintenance
9. Bricks One thousand
10. Hotel Per room/day
In this various terms such as passenger km, quintal km, tonne km, these are all known as composite units and are computed in 2 ways:
a) Absolute (weighted average): (e.g.) tones km - Multiplying total distance by
respective load quantity.
b) Commercial (simple average): (e.g.) tonne Km–Multiplying total distance by
average load quantity
All accumulated cost is classified into 3 categories:
1) Standing charges (or) fixed cost
2) Running cost (or) variable cost
3) Maintenance charges (or) semi variable cost
Running charges = Fuel, Driver Wages, Depreciation, oil etc.
Maintenance charges = Supervision salary, Repairs and Maintenance
Note:-
• % of factory overheads on direct wages
• % of administration overheads on works cost
• % of selling & distribution overheads on works cost
• % of profit on sales
Operating cost sheet :-
Particulars Total cost Cost per km
A Standing charges :-
License fees
Insurance Premium
Road tax
Garage rent
Driver’s wages
Attendant-cum-cleaner’s wages
Salaries and wages of other staff
Total
B Running charges :-
Repairs and maintenance
Cost of fuel (diesel, petrol etc.)
Lubricants, grease and oil
Cost of tires, tubes and other spare parts
Depreciation
Total
C Total charges [ (A) + (B) ]
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