Following are the operating cost questions and answers.
Operating Costing Problems and Solutions
1. What is Operating Costing Method?
Operating cost is a method to ascertain operating cost per unit where standardized services are provided for example an undertaking engaged in the hotel, cinema, transportation, etc. may use it.
2. What is the object of Transport costing?
- To determine the per unit cost of carrying goods
- To determine fare per passenger etc.
3. What is a simple Cost unit?
Only one factor is considered while computing cost in simple cost unit vis. Per tonne per kilometer per bed etc.
4. Give two examples of the Composite cost?
When two cost factor is compounded or considered it is known as compound unit vis per tonne-kilometer, per passenger km, etc.
5. What is the meaning of standing charges in operating costing?
Standing charges mean those expenses which are based on time and not on the operating process for example insurance premiums, license fees, road tax, etc.
6. In which concern operating costing is applicable?
It is mainly used for the following types of industries:
- Bus, train, and railway industry.
- Electric supply industry.
- Water supply industry.
- Hospital, canteen.
7. What will be the cost per unit in the hotel costing?
Cost unit in hotel costing is per bed, per person, per day.
8. Explain the absolute tonne kilometer?
The journey from one station to another is treated as an independent journey distance multiplied by the weighted total of all journies is absolute tonne per kilometer.
9. What do you understand by commercial tonne kilometer?
A commercial tonne-kilometer is computed by multiplying the average weight by the total distance of the journey.
10. State the object of the operating costing method?
Objects of transport cost accounting are as under:
- To determine the operating cost and per unit cost of every vehicle for a specified period.
- Caparison of transport cost of vehicles to determine which of the vehicle is beneficial.
- Control over expenses is possible with the help of cost accounts.
- To ascertain utilization of vehicles by computing vehicle utilization ratio.
11. What is the difference between absolute and commercial ton KM?
In absolute ton-km. a journey from one station to another is treated as an independent journey distance multiplied by weight while a commercial tonne-kilometer is computed by multiplying the average weight by the total distance of the journey.
12. What is the meaning of cost unit in operating costing?
- In operating costing: cost units can be classified into two parts simple cost units, and composite cost units.
- Simple cost unit: only one factor is considered while computing cost in simple cost unit viz per tonne, per kilometer per bed, etc.
- Composite cost unit: when two cost factors are compound or considered per passenger km etc.
13. How are expenses classified in transport costing?
Expenses are classified as under:
Fixed charges: expenses which are related to time not with operating are license fees, insurance charges, road tax, garage rent, supervisor salary, the salary of staff, director fees, interest on capital, wages of the driver, conductor fees, interest on capital wages of driver conductor and cleaner, etc.
Variable charges: expenses related to the operation of service are: depreciation of the vehicle, cost of petrol, diesel, mobile oil repairs, and maintenance, the salary of the driver, conductor, and cleaner wear and tear of tires, etc.
14. What is the daily log Sheet?
A logbook maintained to collect information regarding cost in transport units is termed as a log book this book is useful in cost accounting and control a log book is maintained for every vehicle, daily log sheet is filled in by the driver and he put it up to the transport manager.