IN ASSOCIATION WITH

S. Y. B. Com. (Semester – IV).

MANAGEMENT ACCOUNTING
UNIT – II – Operating Costing / Service Costing (Transport)
Meaning :
Operating Costing is a method of costing of ascertaining cost of the undertakings which do
not produce products but which render services. Operating costing is also known as service
costing. Operating cost is the cost of rendering services. It is the cost of producing and
maintaining a service. Industries using operating costing do not produce tangible products;
but useful service is rendered. For example, transport services, utility services like hospitals,
canteens etc. distribution services like supply of electricity, gas etc. The costs incurred to
render services is called operating costs. The object of operating costing is to ascertain the
operating cost.
Services Using Operating Costing :
Services Type of Services
1. Transport Services Bus, Railway, Tramway, Air-ways, Shipping etc.
2. Supply Services Electricity, Steam, Water, Gas, etc.
3. Boarding and Lodging Hostels, Hotels, Lodges, Restaurants, Cafeteria,
Services Canteens etc.
4. Welfare Services Hospitals, Schools, Colleges, Libraries, Cinemas etc.
5. Municipal Services Road Maintenance, Street Light etc.

In some service organizations, service may be first produced and them supplied. For
example, an electricity supply undertaking may generate as well as supply electricity. Thus
operating costing may also have an element of production.
Cost Unit in Service Undertakings :
Cost unit in service undertaking is generally a composite unit consisting of quantity, distance
or period depending on the nature of services. The cost unit applicable to various services
undertakings is given below.
No. Services Single Cost Unit Composite Cost Units
1. Transport Services Per Kilometer, Per Passenger-Kilometer.
Per Tonne Per Tonne-Kilometer.
Per Passenger
2. Supply Services (Electricity) Per Kilowatt, Per Kilowatt-Hour or (KWH)
Per Hour
3. Boarding/Lodging (Canteen) Per cup of tea, Per Cup-Person

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4. Welfare Services (Hospital)
Per meal
Per Person
Per Patient, Per Day
Per Bed
Per Meal Person.
Per Patient-Day/Week
Per Patient Bed

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Welfare Services (College) Per Student,
Per Term
Service Costing 1
Per Student Term
number of persons travel in the same bus at the same time. In this case, total composite
units passenger-kilometers will be arrived at by multiplying the number of passengers in the
bus and distance traveled. However, if the whole is hired by one party then the cost unit may
be only kilometer or a trip.
Similarly in truck service, a truck may carry different quantities of goods to more than one
place. In this case, total composite units, tonne-kilometers will be composite by multiplying
the weights of goods by the distance for which goods are to be carried.

Transport Costing :
Transport is one of the services performed by railways, roadways, steamers, good carriers
etc. Such businesses adopted operating costing for the purpose of finding the total cost of
each vehicle and then applying it to the unit cost. The cost information helps in charging for
the services provided to the customers. It also helps in making comparison among the
vehicles among the vehicles and alternative modes of transport. In transport costing all costs
are classified under the following three heads :
1. Operating and Running Charges which are mostly variable in nature.
2. Standing Charges which are usually fixed in nature and
3. Maintenance Charges which are semi-variable in nature. V

1. Operating and Running Charges (Variable Cost) :

These are expenses which are very essential for operating the vehicles. They are incurred
on the actual running of the vehicles. These expenses are zero when the vehicles are off
the road. These expenses vary with the operation in the same direction and more or less
in the same proportion. Hence these expenses are variable in nature. The examples of these
expenses are as follows :
a) Petrol and Diesel.
b) Oil and Grease.
c) Wages of Driver, Conductor etc. (if paid on the basis of trip or distance covered)
d) Depreciation (if it is allocated on the basis of mileage run or trips)
2. Standing Charges (Fixed Cost) :
These expenses are to be incurred whether the vehicle operates or not. These expenses
go on accumulating as the time passes. The vehicle may be idle, but even then its expenses
have to be met. These are more or less fixed in nature. The examples of these expenses are
as follows :
a) Road License fees.
b) Insurance Premium and Motor Vehicle Taxes.
c) Wages of Driver, Conductor etc. (if payment is made on monthly basis).
d) Depreciation (if it is allocated on the basis of affluxion of time)
e) Interest on capital
f) Garage Rent
g) General Administration and Supervision Charges.
3. Maintenance Charges (Semi-Variable Cost) :
These expenses are incurred on the repairs and maintenance of vehicles to keep them in
good condition. They are semi-variable in nature. The examples of these expenses are as
follows :
a) Tyres and Tubes.
b) Painting
c) Spares and Accessories.

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d) Repairs and Overhauling.
e) Hire of spare vehicles when the firm‟s own are under repair.
Note :
Often information about semi-variable costs is not available (in the questions). In that case,

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costs are shown under two heads only, i.e. Fixed and Variable. All costs other than variable
costs are generally accumulated under fixed costs.
Service Costing 2
Collection of Costs :
Like job or contract costing, each vehicle is given a distinct number. All the basic documents
of that vehicle will contain the number. The driver has a separate Daily Report or Log Book
for each vehicle. It will give performance statistics of each vehicle. It will be helpful for the
ascertainment of cost control. All the details of the log book gives the full description of the
vehicle, its purchase and other control costs and the standing charged to be incurred. The
second part furnished the cost of maintaining the services and the third part gives the
essential information for the consumption and control of the operating cost.
Composite Cost Units for Transport Undertakings :
Since the operating costs are influenced by two important variables viz, distance and number
of passengers or the weight of goods carried, it is advisable to use a composite cost unit to
transport undertakings. Therefore either the passenger-kilometer or tonne-kilometer is used
depending on the nature of the undertaking whether it is a passenger undertaking or goods
transport undertaking.
Cost Ascertainment :
A separate cost sheet for each vehicle is maintained by the cost accounting department. The
specimen of a Cost Sheet prepared in transport undertakings is given below :

Vijay Motor Transport Ltd.

Operating Cost Sheet for the Month of _____________________________
Vehicle No. _ _ _ _ _ of Trips ________ Distance Traveled _____ Carrying Capacity _____

Particulars ` `
A. Standing Charges (Fixed Cost) :
Salary:
- Manager
- Accountant
- Driver (if paid on monthly basis)
- Cleaner (if paid on monthly basis)
- Attendant (if paid on monthly basis)
Road License Fees
Insurance Premium
Motor Vehicle Taxes
Depreciation (if it is allocated on the basis of afflux ion of time)

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Interest on Capital
Garage Rent
Supervision Charges
General Administration Charges.

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B. Operating and Running Expenses (Variable Cost) :

Service Costing 3
Total A
 Total B
C. Maintenance Expenses (Semi-Variable Cost) :
Tyres and Tubes.
Painting
Spares arid Accessories.
Repairs and Overhauling.
Hire of spare vehicles when the firm‟s own are under repairs
Total C
Total Operating Cost (A + B + C)

EXAMPLES

Ex. 1 : From the following information, calculate kilometers and passenger kilometers :
No. of Buses : 5; Days operated in a month : 25; Trip made by each bus each day : 8;
Distance of route : 20 kilometers (one side); Capacity of Bus : 50 passengers.

Ex. 2 : From the following information, calculate total kilometers and total passenger
kilometers : No. of Buses : 4; No. of Days operated in a month : 25; No. of trips made
by each bus each day : 10; Distance (one side) : 8 kms.; Capacity of Bus : 50
passengers; Capacity Utilised : 90%.

Ex. 3 : A goods transport company furnishes the following details in respect of a 10-ton
capacity lorry. A lorry carries goods to and from the city covering a distance of 80 kms. each
way. On onward trip freight is available for full capacity (i.e. 10 tonnes) and on return trip;
freight is available only up to the extent of 40% of the capacity (i.e. 4 tonnes). Lorry runs on
an average, 3 round trips a day and 30 days a month. From the above information compute
the total tonne-kilometers per month.

Ex. 4 : A passenger vehicle plies between two cities covering a distance of 105 kms. each
way. The vehicle makes three round trips daily carrying, on an average 50 passengers.
Assuming that the vehicle is operated every day, determine the passenger kilometres per
day and per month.

Ex. 5 : A transport company runs 4 buses between two towns which are 50 kilometers
apart. All the 4 buses run on 25 days in a month and each bus make two round trips per day.
The seating capacity of each bus is 50 passengers (100% capacity) and actual passengers
carried are 80% of the capacity. Calculate the total kilometers and total passenger
kilometers.

Ex. 6 : A truck starts with a load of 10 tonnes of goods from station A. It unloads 4 tonnes at
station B and rest of goods at station C. It reaches back directly to station A after getting
reloaded with 8 tonnes of goods at station C. The distance between A to B and B to C and
then C to A are 40 kms., 60 kms. and 80 krns. respectively. Calculate absolute tonne
kilometers.

Ex. 7 : (13/5/2015). (2.5)

A passenger vehicle plies between two cities covering a distance of 110 kms each way. The
vehicle makes three round trips daily carrying, on an average 50 passengers. Normal
percentage of the Vehicle laid up repair is 10%. Assuming that the vehicle is operated 25
days a month, determine the total passenger kilometers per month.

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Ex. 8 (C) : Ossy Transport Ltd. supplies the following information in respect of a truck of 5
tonnes capacity.

Cost of Truck ` 18,00,000 Estimated Life 5 years

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Diesel Oil and Grease ` 200 per trip each way

Service
Repairs and Maintenance ` 2,500 per month

Costing 4
the capacity. Assuming that the truck runs on an average 25 days a month, find out the
operating cost per tonne-kilometer. Freight per Tonne – Kilometer to be charged, if the rate
of profit is 50% on freight is to be earned.

Ex. 9 : (13/5/2015). (15)

PAVAN Transport Ltd. owns a truck of 10 tonnes capacity. The truck carries goods from
Vadodara to Ahmedabad and back covering a distance of 110 Kms. on each way. While
going to Ahmedabad, freight is available to the extent of full capacity, on return 80% of the
capacity. The truck runs on an average 25 days in a month and makes only one round trip in
a day. Other details related to the truck are :

General supervision charges and Taxes ` 14,100 per month

Repairs and Maintenance ` 40,000 per month
Cost of Truck ` 20,80,000 and Scrap Value ` 2,80,000 (Estimated Life 5 years)
Lubricant Oil and Grease ` 2,000 per 1,100 Kilometers
Diesel Consumption One litre for 5 Kilometers and Diesel Price ` 60 per litre
Cleaner‟s Salary ` 5,500 per month and Driver‟s Salary ` 11,000 per month

Insurance p.a. @ 6% of cost of truck. Tyre cost ` 11,000 per month. Calculate total
operating cost per month, per tonne-kilometer and Freight per Tonne-Kilometer to be
charged, if the rate of profit is 20% on fright to be earned.

Ex. 10 (C) : (16/4/2016). (15)

Uma Travels runs a passenger vehicle between two cities covering a distance of 50 kms.
apart. The cost of the vehicle ` 14,00,000 and interest on the vehicle financed is 12% per
annum. The effective life of the vehicle is estimated at 10 years and at the end of its useful
life, it will have a residual value of ` 3,20,000. The following further details are available.
Particulars (`)
Vehicle Insurance per annum …………………………. 30,000
Garage rent per month …………………………………. 2,500
Road tax per annum …………………………………….. 48,000
Repairs and maintenance per month …………………. 2,400
Administrative charges per annum ……………………. 36,000
Driver‟s and Conductor‟s Salary per month ………….. 10,000
Tyre – tube Replacement cost per annum ……………. 24,000

Diesel and Oil cost ` 3.2 per km. The vehicle makes three round trips per day and runs on an
average 25 days per month. The seating capacity of the vehicle is 50 passengers (100%
capacity) and actual passengers carried are 80% of the seating capacity per trip. Uma
Travels expects profit at 50% on total fare charges. Prepare Operating cost sheet of a month
and also calculate the fare to be charged from per passenger per kilometer.

Ex. 11 : (2/5/2017). (2.5)

A passenger vehicle plies between two cities covering a distance of 56 kms. each way. The
vehicle makes two round trips daily. Total operating cost of vehicle is ` 4.85 per kilometer
and hire charges are ` 6 per kilometer. Determine the profit for the year 2019 assuming that

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vehicle is operated on an average 300 days in a year.

Ex. 12 (C) : The SUN Transport Ltd. has been given a 60 kms. long route to run a bus. The

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bus costs ` 12,00,000 and has been insured at 10% p.a. The bus is likely to last for 5 years.

Service Costing 5
calculate the bus fare to be charged from each passenger per kilometer. The bus runs on an
average 25 days in a month.

Ex. 13 (C) : (27/2/2015 – Mid. Sem.). (10)

Mr. VED wants to start a business of Passenger Transport which will be managed through
Mobile Application “CAB ON CLICK”. For this, he has purchased two cars DESIRE and
ALTO. From the following expected information suggest taking (fare) per kilometer to be
recovered from the passenger. Expected Kilometer‟s run during the year by DESIRE is
40,000 and ALTO is 60,000. The Kilometers run per litre are 12.5 in case of DESIRE and 15
in case of ALTO. Other information :
Particulars DESIRE ALTO
Purchase Price (`) 6,00,000 3,60,000

Scrap Value after 6 years (`) 1,20,000 48,000

Road Licence Fees and Taxes p.a. (`) 18,000 9,800

Driver‟s Salary p.a. (`) 48,000 36,000

Repairs and Maintenance is ` 1.75 per kilometer. Insurance premium at 2% p.a. Cost of
Fuel is ` 60 per litre. Commission and Promotion charges assumed to be 2% of the taking
and Profit @ 23% on taking is desired by the owner.

Ex. 14 : (26/4/2019). (15)

Mr. PAVAN wants to start Passenger Transport business to be managed through Mobile
Application “CAB ON DEMAND”. He has purchased two cars SWIFT and NANO. From the
following expected information suggest taking (fare) per kilometer to be recovered from the
passenger. Expected Kilometers run during the year by SWIFT is 54,000 and NANO is
60,000. The Kilometers run per litre are 18 in case of SWIFT and 30 in case of NANO.
Other information :
Particulars SWIFT NANO
Purchase Price (`) 7,50,000 2,80,000
Scrap Value after 5 years (`) 2,00,000 30,000
Road Licence Fees and Taxes p.a. (`) 17,500 15,200
Driver‟s Salary ` 60,000 p.a. for each car. Repairs and Maintenance is ` 3 per kilometer.
Insurance premium at 2% p.a. Interest @ 9% on Cost p.a. Cost of Fuel is ` 72 per litre.
Commission and Promotion charges assumed to be 3% of the taking and Profit @ 17% on
taking is desired by the owner.

Ex. 15 (C) : A company is considering three alternative proposals for conveyance facilities
for its sales personnel who have to do considerable traveling, approximately 20,000
kilometers every year.
The proposals are as follows :
(i) Purchase and maintain its own fleet of cars. The average cost of a car is ` 1,00,000.
(ii) Allow the executive to use his own car and reimburse expenses at the rate of ` 1.60 paise
per kilometer and also bear insurance costs.
(iii) Hire cars from an agency at ` 20,000 per year per car. The company will have to bear
costs of petrol, taxes and tyres.

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The following further details are available :
Petrol Re. 0.60 per k.m., Tyre Re. 0.12 per k.m.; Repairs and Maintenance Re. 0.20 per
k.m., Taxes ` 800 per car per annum; Insurance ` 1,200 per car per annum; Life of the car : 5
years with annual mileage of 20,000 kms.; Resale value : ` 20,000 at the end of the fifth year.

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Work out the relative costs of three proposals and rank them.

Service Costing 6
 Peon‟s salary ` 250 p.m. Mechanic‟s salary ` 300 p.m.
Office rent ` 250 p.m. Office routine expenses ` 500 p.m.
Repairs & maintenance ` 7,285 p.m. per bus Taxes ` 6,000 p.a.
Driver‟s Salary ` 800 p.m. per bus Road licence ` 600 p.a. per bus
Interest @ 18% p.a. Km per litre of fuel 20 k.m.
Cost of fuel ` 300 per 10 litres Total capacity 50 passengers
Average capacity which is used 90% Normal % of vehicles laid up for repair 5%
No. of round trips per day 4 Distance of route 20 k.m.
Working days in a month 25 Manager‟s salary ` 1,000 p.m.
Cost of tickets ` 10 per 1000 passenger km Cost of each tyre ` 3,000
Tyres to be replaced per bus 1 p.m.

Commission @ 10% of the taking is to be paid to conductor and Profit 2 20% on taking is
desired by the owner. Calculate : (a) Cost per Month; (b) Cost per Day; (c) Cost per Trip;
(d) Cost per K.m.; (e) Cost per Passenger K.m. (f) Bus fare to be charged from each
Passenger.

HOME - WORK

Ex. 17 (C) : PAVAN Transport Company runs 2 buses between two towns which are 100
kilometers apart. All the 2 buses run on 25 days in a month and each bus make two round
trips per day. The seating capacity of each bus is 60 passengers (100% capacity) and actual
passengers carried are 80% of the seating capacity. Calculate the total kilometers and total
passenger kilometers. [Ans. : Total Km. : 20,000, Total Passenger Km. : 9,60,000].

Ex. 18 : (30/4/2005). (03)

A transport service company is running TEN buses between two towns which are 30 Kms.
apart. Seating capacity of each bus is 50 passengers. Actually, passengers carried were
80% of the Seating capacity. All buses ran on all 30 days of the month. Each bus made one
round trip per day. Calculate Passenger Kms. for the month. [Ans. : 7,20,000].

Ex. 19 : (17/11/2008). (03)

A goods transport company furnishes the following details in respect of a 10 tonne capacity
lorry. The lorry carries goods to and from the city covering a distance of 60 km each way.
On onward trip freight is available for full capacity and on return trip, freight is available only
up to extent of 40% of the capacity. Lorry runs on an average, 3 round trips a day and 25
days a month. Calculate the total tonne-kilometers per month. [Ans. : 63,000].

Ex. 20 : (28/4/2007). (03)

A Truck starts with a load of 10 Tonnes of goods from station „A‟. It unloads 2 Tonnes at
station „B‟ and rest of goods at station „C‟. It reaches back directly to station „A‟ after getting
reloaded with 9 Tonnes of goods at station „C‟. The distance between „A‟ to „B‟ and „B‟ to „C‟
and then „C‟ to „A‟ are 60 km., 80 km. and 100 km. respectively. Calculate absolute Tonne
Kilometers. [Ans. : 2,140].

Ex. 21 (C): (16/4/2016). (2.5)

A truck starts with a load of 15 tonnes of goods from station D. It unloads 10 tonnes at
station K and rest of goods at station C. Further, the truck reloaded with 7 tonnes of goods
at station C, reaches to station V and unloads the goods. It again reloaded with 9 tonnes of
goods at station V & reaches back directly to station D. The distance between stations are :

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D to K: 500 kms., K to C: 750 kms., C to V: 350 kms., V to D: 900 kms. Prepare a table
showing total tone kilometers. [Ans. : 21,800].

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Garage Rent ` 1,08,000 p.a., Charge interest @ 9% p.a. on cost of car and Insurance
premium at 2% p.a., Tyre and Repairs & Maintenance cost is ` 2 per kilometer, Driver‟s
Salary is ` 125 per hour. Commission and Promotion charges assumed to be 3% of the
taking and Profit @ 33% on taking is desired. You are required to calculate total Taking and
Operating cost for the year. [Ans. : Taking : ` 10,00,000/-, Op. Cost : ` 6,70,000].

Ex. 23 : (24/4/2018). (15)

Mr. KRISHNA has started a passenger transport Business namely „MIHIR Travels‟. He
purchased a bus at a cost of ` 18,00,000 with estimated life of 10 years. The bus is running
between Vadnagri to Karnavati covering a distance of 110 kilometers each way. The bus
makes three round trips per day carrying on an average 40 passengers in each trip. The
kilometers run per litre are 10. Cost of Fuel is ` 64 per litre. Bus runs 55 kilometers per hour
on an average. Road Licence Fees ` 20,520 p.a., Manager‟s Salary and Garage Rent `
72,000 p.a., Charge interest @ 9% p.a. on cost of bus and Insurance premium at 3% p.a..
Tyre and Repairs & Maintenance cost is ` 3 per kilometer. Driver‟s Salary is ` 30 per hour
and Conductor‟s Salary is ` 150 per day. Commission to Driver, Conductor, Agents and
Promotion charges assumed to be 6% of the taking and Profit @ 15% on taking is desired.
You are required to calculate total Taking and Operating cost for the year assuming that bus
is running for 300 days a year. [Ans. : Taking : ` 31,68,000/-, Op. Cost : ` 26,92,800/-].

Ex. 24 (C) : (17/2/2016 – Mid. Sem.). (10)

A mini bus plies between two cities covering a distance of 40 kms each way. The bus costs `
2,00,000 and has estimated useful life of 5 years. It has been insured at 4% per annum.
The annual road tax amounts to ` 4,000. Garage rent ` 800 per month. Annual repair is
estimated to cost ` 2,480. The salary of the driver and the Conductor is ` 1,200 per month
and ` 1,000 per month respectively. The Manager‟s salary is ` 1,500 per month and
Stationery costs ` 200 per month, Petrol and Oil will cost ` 110 per 100 kilometers. The bus
will make three round trips per day carrying on an average 30 passengers in each trip. The
bus will run on an average 25 days in a month. The profit at 20% on taking is desired by the
owner.
Prepare Operating cost sheet on a „full year basis‟ and also calculate the bus fare to be
charged from each passenger per kilometer. [Ans. : Fare : 2,37,600/-, Op. Cost : 1,90,080/-]

Ex. 25 : (18/4/2013). (03)

A transport company runs four buses between two towns which are 25 kilometers apart. All
the four buses run on 25 days in a month and each bus make two round trips per day. The
seating capacity of each bus is 50 passengers (100% capacity) and actual passengers
carried are 80% of the seating capacity. Calculate the total kilometers and total passenger
kilometers. [Ans. : 10,000/-, 4,00,000].

Ex. 26 : (5/5/2014). [2.5]

A goods transport company furnishes the following details in respect of a 15 Tonnes capacity
lorry :

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A lorry carries goods to and from the city covering a distance of 120 kms. each way. On
onward trip freight is available for full capacity (i.e. 15 tones) and on return trip, freight is
available only up to the extent of 40% of the capacity (i.e. 6 tonnes). Lorry runs on an
average, 3 round trips a day and 30 days a month. From the above information compute the

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total Tonne-Kilometers per month. [Ans. : 2,26,800].

Service Costing 8
the total tonne-kilometers per months. [Ans. : 2,01,600].

Ex. 28 : (16/4/2009). (04)

A truck owner provides you the following information.
Capacity of truck 10 tonnes
Distance covered each way 50 Kms.
No. of round trips per day 2
No. of days operated 25 days a month
Operating cost of a truck ` 55,000 per month.
On outward trip, freight is available to the extent of 90% capacity and on return 20% of the
capacity. You are required to calculate : (i) Tonne-Kms per month, (ii) Operating Cost per
Tonne-Km. [Ans. : (i) 27,500, (ii) ` 2/-].

Ex. 29 (C) : Ayush has two vehicles A and B. The cost of vehicles is ` 25,000 and ` 15,000
respectively. The estimated life of the vehicles is 1,00,000 miles of Vehicle A and 75,000
miles of Vehicle B. During the year the mileage run by Vehicle A is 15,000 miles while
Vehicle B is 6,000 miles. The miles run per litre are 6 in case of Vehicle A and 5 in case of
Vehicle B. Following is the additional information :

Vehicle A (` ) Vehicle B (` )
Road Licence Fees p.a. 750 750
Supervisor‟s Salary p.a. 1,800 1,200
Garage Rent p.a. 1,600 550
Insurance premium p.a. 850 500
Interest @ 10% on cost of the vehicles -- --
Repairs and Maintenance per mile 1.50 2.00
Cost of fuel per litre 1.50 1.50
Tyre cost per mile 1.00 0.80
Driver‟s Salary per hour 4.00 4.00
Charge interest @ 10% on cost of vehicles. Vehicles run 20 miles per hour on an average.
Calculate : (1) The cost of running each Vehicle per mile and (2) If the hire charges are ` 5
per kilometer, find out the profit of Ayush may expect to make in the year of operation.
[Ans. (1) Vehicle A : ` 3.70, Vehicle B : ` 4.25, (2) ` 1,99,500/-].

Ex. 30 : (19/3/2013 – Mid-Sem.). (10)

Mr. Satish Patel, a practicing Chartered Accountant now spends ` 12.00 per kilometer on taxi
fare for his client‟s work. He is considering two other alternatives, the purchase of a New
Small Car or an Old Bigger Car. The estimated cost figures are as follows :
Particulars New Small Car (`) Old Bigger Car (`)
Purchase Price 4,05,000 3,60,000
Scrap Value after 5 years 60,000 37,500
Repairs and Maintenance p.a. 30,000 33,750
Taxes and Insurance p.a. 4,500 2,100
Petrol Price Per Litre 75 75
The petrol consumption is 15 km per litre for New Small Car and 10 Km. per litre for Old
Bigger Car. Mr. Satish Patel estimates that he does 10,000 km. annually. You are required

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to advice, which of the alternatives will be the cheapest?
[Ans. Taxi : ` 1,20,000/-, New Small Car : ` 1,54,000/-, Old Bigger Car : ` 1,79,100/-].

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 Licence Fees 400
Insurance 2,500
Diesel, Oil & other variable costs 8,000
Kms. Driven in 2018-19 10,000
You are required to :
(a) Calculate the estimated annual operating costs for the year 2019-20 and the estimated
cost per km. to be driven in 2019-20;
(b) Indicate whether it would be less expensive for the company to provide a car to the
employee or allow him to use his personal car by reimbursing at above mentioned rate.
During the year 2019-20, the car is estimated to be used by the employee for 15,000 kms.
[Ans. : (a) ` 24,900/-, ` 1.66 per km., (b) ` 30,000/-]

Ex. 32 : City Bus service Ltd. run the following fleet of buses within the limits of Baroda city.
Carrying capacity.
10 Buses 50 passengers
15 Buses 40 passengers
On an average, each bus makes 10 trip a day covering a distance of 8 kms. in each trip and
75% of the seats are occupied. The annual records show that 5 buses are generally
required to be kept away from road each day for repairs. Calculate the effective passenger
kms. for the month of August 2019. [Ans. : 16,36,800].
Further, the following expenses were incurred by the company during March, 2000.

₹
Garage Rent, Rates and Insurance 2,500
Road and Vehicle tax 500
Salary:
Chief Operation Manager 1500
3 Assistant Manager 800 each
4 supervisor 400 each
25 Drivers 240 each
30 Cleaners 100 each
Office staff 4,000
Consumable stores 4,500
Petrol 24,000
Lubricants 5,500
Replacement of tyres and tubes 1,750
Gas & Electricity 350
Miscellaneous expenses 1,800
Repairs 3,500

The cost clerk of company prepared a cost sheet using the annual figures for various
expenses and writing off ₹ 6,500 for depreciation. Shows the cost sheet in proper form as
might have been prepared by the cost clerk.

Ex. 33 : PAVAN Transport company runs 2 buses between two towns which are 100
kilometers apart. All the 2 buses run on 25 days in a month and each bus make two round
trips per day. The seating capacity of each bus is 60 passengers (100% capacity) and actual
passengers carried are 80% of the seating capacity.
Calculate the total Kilometers and total Passengers Kilometers.

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