THE CONCEPT OF COST AND COST ACCOUNTING

Cost is the cash or cash-equivalent

value sacrificed for goods and services
that are expected to bring a current or
future benefit to the organization.
 Cost accounting

• It is the formal accounting system set

up for recording costs. It is a systematic
procedure for determining the unit
cost of output produced or service
rendered. The scope of cost accounting
includes cost ascertainment, cost
recording and cost control
 1. Cost ascertainment

• Mainly deals with collection, analysis

and measurement of various
expenses for product at different
stages of manufacture.
• Basically, the process entails cost
allocation and apportionment
 2 Cost control

• In this context, it means the

guidance and regulations by
executive actions of the cost
operating and undertaking which
aims at guiding the actual results
towards the line of targets.
 Cost control cont’d
• This regulation can be done by
standard costing, budget and control,
proper presentation and reporting of
cost data, as well as cost audits.
 3.Cost Recording

• Cost accounting usually begin with

recording expenditure and ends with
preparation of statistical data.
 Cost Recording cont’d

• From this process, the cost

accounting record should meet all
good qualities of accounting
information, namely; reliability,
comparability, relevance, timeliness,
objectivity, and understandability.
 TRANSPORT COSTS AND COSTING

Cost Classification in Transportation

Services
 Cost Classification in Transportation
Services

• In transportation undertaking, costs

are usually classified on behavioral
basis, mainly as fixed costs (standing
charges) and variable costs (running
charges).
 Note:

Take note:
Take note on transport costs and rates presented in box 1.1
 Transport Costs and Costing

Box 1.1: Transport charges

Transport costs are a monetary measure of what the
transport provider must pay to produce
transportation services. Transport costs come as
fixed (infrastructure) and variable (operating) costs.
Rates are the price of transport services paid by their
users. They are the negotiated monetary cost of
moving a passenger or a unit of freight between a
specific origin and destination.
 Types of transport costs
Variable Costs (Running Costs)
• These are costs which rise or fall (vary) with the
intensity of the operation of the vehicle such as;
 Fuel
 Lubricants
 Tyres and tubes
 Repairs and maintenance
 Drivers/conductors, turn boys overtime, incentives &
 Fixed Costs (Overheads, Standing Costs)

 These are costs which remain almost constant

regardless the intensity of operation of the vehicle
such as;

 Depreciation (vehicles)

 Salaries & wages (operating staff)

 Insurance premiums
 Fixed costs cont’d
 License fees
 Interest
 Rents and Bills
 Administration (salaries & other
costs)
 Exercise

Think Pair and Share:

Share experiences on various types of
transport costs incurred in your
organization
 Transport Costing
• Transport costing is the method of
ascertaining the cost of providing
service by a transport
undertaking/organization. The
Transport service may be passenger
transport or goods transport
(freight).
 Transport Costing Cont’d

• It may include all modes of transport

i.e., road, air or sea. The cost so
determined provides a good basis for
determination of price to be charged
from the users. It also helps in the
decision making.
 The objectives of transport costing:

1. To ascertain the operating cost of running a

vehicle per kilometer.

2. To fix the rates of carriage of goods or

passengers on the basis of operating costs.

3. To fix the hire charges where vehicles are given

on hire.
 Objectives cont’d

4. To compare the cost of using own vehicles

with that of using alternative mode of transport.

5. To determine what should be charged to

departments which use internal transport
facilities.
 Some Key Operational Definitions

•The following terms are usually used

in transport accounting with the
meaning specified :
 Cost of Transportation

(a)Cost of Transportation (transport cost) comprises

of the cost of freight, cartage, transit insurance and
cost of operating fleet and other incidental charges
whether incurred internally or paid to an outside
agency for transportation of goods but does not
include detention and demurrage charges.
• Explanation :

• Cost of transportation is classified as

inward transportation cost and outward
transportation cost.
(b) Inward Transportation cost is the
transportation expenses incurred in
connection with materials /goods
received at factory or place of use or
sale/removal.
(c) Outward Transportation cost is the

transportation expenses incurred in connection

with the sale or delivery of materials or goods

from factory or depot or any other place from
where goods are sold /removed.
d) Freight is the charges paid or payable to

an outside agency for transporting

materials/ goods from one place to another
place.
• Freight expense refers to the price that is
charged by a carrier for sending out
cargo from the source location to the
destination location. The expense is paid
by the person who wants the goods
transported from one location to another.
• Freight in is the transportation cost
associated with the delivery of goods
from a supplier to the receiving entity.
For accounting purposes, the recipient
adds this cost to the cost of the received
goods.
• Freight out is the transportation cost
associated with the delivery of goods
from a supplier to its customers. This
cost should be charged to expense as
incurred and recorded within the cost of
goods sold classification on the income
statement.
(f) Cartage is the expenses incurred for
movement of goods covering short distance
for further transportation for delivery to
customer or storage.
• (g)Transit insurance cost is the amount of
premium to be paid to cover the risk of
loss /damage to the goods in transit.
• (h) Depot is the bounded premises /place
managed internally or by an agent, including
consignment agent and C & F agent, franchisee
for storing of materials/goods for further
dispatch including the premises of Consignment
agent and C&F Agent for the purpose .
• Depot includes warehouses, go-downs,
storage yards, stock yards etc.
• (i) Equalized transportation cost means

average transportation cost incurred

during a specified period while Equalized
freight means average freight.
 Maintenance of records for
ascertaining Transportation Cost
• Proper records shall be maintained for
recording the actual cost of transportation
showing each element of cost such as freight,
cartage, transit insurance and others after
adjustment for recovery of transportation cost.
•Abnormal costs relating to
transportation, if any, are to be
identified and recorded for exclusion
of computation of average
transportation cost.
• In case of a manufacturer having his own transport fleet,
proper records shall be maintained to determine the actual
operating cost of vehicles showing details of various elements
of cost, such as salaries and wages of driver, cleaners and
others, cost of fuel, lubricant grease, amortized cost of tyres
and battery, repairs and maintenance, depreciation of the
vehicles, distance covered and trips made, goods hauled and
transported to the depot.
• In case of hired transport charges incurred for
despatch of goods, complete details shall be
recorded as to date of despatch, type of transport
used, description of the goods, destination of
buyer, name of consignee, challan number,
quantity of goods in terms of weight or volume,
distance involved, amount paid, etc.
• Records shall be maintained separately for
inward and outward transportation cost
specifying the details particulars of goods
despatched, name of supplier / recipient,
amount of freight etc.
• Separate records shall be maintained for identification of
transportation cost towards inward movement of
material (procurement) and transportation cost of
outward movement of goods removed /sold for both
home consumption and export.

• Records for transportation cost from factory to depot and

thereafter shall be nmaintained separately.
• Records for transportation cost for
carrying any material / product to job-
workers place and back should be
maintained separately so as include the
same in the transaction value of the
product.
• Records for transportation cost for goods
involved exclusively for trading activities shall
be maintained separately and the same will not
be included for claiming any deduction for
calculating assessable value excisable goods
cleared for home consumption.
• For common transportation cost, both for own
fleet or hired ones, proper records for basis of
apportionment should be maintained.

• Records for transportation cost for exempted

goods, excisable goods cleared for export shall be
maintained separately.
• Separate records of cost for mode of
transportation other than road like ship, air etc
are to be maintained in separately and where
necessary appropriate computation may be
required to include in total cost of
transportation.
 Treatment of cost

• Inward transportation costs shall form the part of the

cost of procurement of materials which are to be
identified for proper allocation/ apportionment to the
materials / products.

• Outward transportation cost shall form the part of the

cost of sale and shall be allocated / apportioned to the
materials and goods on a suitable basis.
• Explanation :

• Outward transportation cost of a product from factory to depot or

any location of sale shall be included in the cost of sale of the
goods available for sale.

• The following basis may be used, in order of priority, for

apportionment of outward transportation cost depending upon the
nature of products, unit of measurement followed and type of
transport used :
• i) Weight
• ii) Volume of goods
• iii) Tonne-Km
• iv) Unit / Equivalent unit
• v) Value of goods
• vi) Percentage of usage of space
• Once a basis of apportionment is adopted , the same
should be followed consistently.

• For determining the transportation cost per unit, distance

shall be factored in to arrive at weighted average cost.

• Abnormal and non recurring cost shall not be a part of

transportation cost.
• Explanation

• Penalty, detention charges, demurrage and

cost related to abnormal break down will
not be included in transportation cost.
 Cost allocation and apportionment

• Cost allocation is the process of identifying,

aggregating, and assigning costs to cost
objects. A cost object is any activity or item
for which you want to separately measure
costs. Examples of cost objects could be a
department, a product, machinery, vehicle,
etc.
• The very term "allocation" implies that there
is no overly precise method available for
charging a cost to a cost object, so the
allocating entity is using an approximate
method for doing so. Usually allocation is
done for direct costs.
• Cost apportionment on the other hand refers to
distribution of various overhead cost items, in
proportion, to the cost centre on a logical basis. It
represents that part of cost attribution, which shares cost
among multiple cost units, in the proportion of expected
benefit received. Cost apportionment is normally done
for overheads distribution amongst cost objects.
Class activity
Explain how you can allocate or apportion the following costs: Freight Cost, Freight –
in cost and Freight -out cost.
 Computation of costs of transport
undertaking
A transport company produces a product and the product or output
is a transport service which can be measured in terms of:
 Kilometers operated

 Passenger carried

 Tones carried

 Passenger – kilometers operated

 Ton – kms operated

• In order to produce the above transport output, the company needs
certain INPUTS which are:

i) Labour: - Drivers, conductors, Turn boys, Mechanics, Inspectors,

Supervisors, Managers etc.

ii) Materials: - Vehicles, Workshops, Offices, Fuel, Lubricants, Tyres

and Tubes, spare parts etc.

• All these inputs can be measured in terms of their costs. So costing

is necessary in Transport.
 Depreciation

• Depreciation is one of important fixed

costs to be calculated for vehicles and
equipment. Depreciation is the measure
of wearing out, consumption or other loss
of value of fixed asset whether arising
from use, passage of time or
obsolescence through technology or
market changes.
• Depreciation is determined by spreading out of
the initial cost of an asset over its economic
lifetime or an amount set aside by
appropriation out of revenue for replacement
of assets. In most cases, many organizations
do not account for depreciation.
• Nevertheless, it is a cost and should be used
to establish the amount of money an
organization or government should set aside
each year in order to secure future
replacement of vehicles, vessels,
motorcycles, and others.
• For accounting purposes, the annual
depreciation cost for each asset
should be calculated by using
appropriate method under existing
government guidelines or selected
accounting policies.
Methods of determining depreciation

• Although there are different methods for

calculating depreciation, for the purpose of
transport costing, we will focus on two
common methods: Straight Line Method and
Sliding Method
 Straight Line Method

• Using straight line method, depreciation is

given by:
Cost –Salvage value
Useful economic life
• Example, a lorry was bought by a cost of TZS
120,000,000. Residual value is estimated to be
TZS 15,000,000. This is after ten years of its
economic life.
• Required:

• Compute depreciation per annum

• Solution:
• Depreciation = Cost –Salvage value
Useful economic life
• 120,000,000-15,000,000
10
• Depreciation = TZS 10,500,000
 Sliding Method

• A new vehicle does more work, earns more

bears the big burden of depreciation. As such
high rates of depreciation are assigned to first
years and decreasing in the following years.
• Example: Depreciation based on 5 years
lifetime can be calculated percentagewise as
follows:
Year Percentage of cost
1 35%
2 25%
3 20%
4 10%
5 10%
• Note: If the same rate is applied for different
years then it will be charged on the reduced
figure; hence it will be a reducing balance
method.
• Example:
• A vehicle was purchased at a cost of TZS
100,000,000. Using the above rates (for five
years), compute annual depreciation for each
year:
Year Bal b/f 1 2 3 4 5

Rate 0.35 0.25 0.20 0.10 0.10

100,000,000 35,000,000 25,000,000 20,000,000 10,000,000 10,000,000

Class Activity
Compute depreciation and state its
importance in asset management. The
scenario in box 8.2 may be useful.
Box 1.2 Depreciation
An asset has a cost of $ 4,800. Depreciation is provided at 25% on
reducing balance. The useful life of the asset is 3 years after which
the salvage value will be $ 2,025
Required:
1. Calculate depreciation using:
i. Straight line method
ii. Reducing balance method for the 3 years
2. Explain reasons why depreciation is regarded as source of
finance
 Straight line method:

• Solutions

• Depreciation = (Cost –Scrap value)/Useful

life
= (4,800-2025)/3 = $ 925
 Reducing balance method

Y1 Y2 Y3

$ $ $
Cost/WDV
(Opening) 4,800 3,600 2,700
Depreciation
(25%) 1,200 900 675

WDV (Closing) 3,600 2,700 2025

Depreciation is regarded as a source of
finance due to the following reasons:
1.It is a tax allowable expense, thus will
yield a tax shield/saving to the
organization since it reduces the
organization’s tax liability
2. Provision for depreciation is an
appropriation of from company’s profits.
This appropriation is transferred to a fund
scheme called sinking fund which becomes
a source of capital for replacing an existing
asset. It is an internal source of finance.
 Additional Points on Depreciation

Depreciation-Recognizing the regular

“using-up” of an asset, such as a building
or long-term equipment, during each
period. • Depreciation is a NON-CASH
expense. While the Income Statement
“recognizes” this impact of a business
“using up” its assets and equipment, the
firm does not actually pay-out this amount
in cash.
• The more depreciation a firm is able to
recognize on its Income Statement the
lower taxes it pays. This tax policy
encourages private businesses to invest
more in new capital assets & equipment
 Composite Cost Unit

• Sometime two measurement units are

combined together to know the cost of service
or operation. These are called composite cost
units. For example, a public transportation
undertaking would measure the operating cost
per passenger per kilometer.
• Examples of Composite units ate Ton-km.,
Quintal-km., Patient-day etc. Composite unit
may be computed in two ways:
(i)Absolute (Weighted Average) basis
(ii)Commercial (Simple Average) basis
• In both bases of computation of service
cost unit, weightage is also given to
qualitative factors rather quantitative
(which are directly related with variable
cost elements) factors alone.
(i)Weighted Average or Absolute basis –It is
summation of the products of qualitative and
quantitative factors. For example, to calculate
absolute Ton-Km for a goods transport is
calculated as follows:
(i)Simple Average or Commercial basis – It is
the product of average qualitative and total
quantitative factors. For example, in case of
goods transport, Commercial Ton-Km is
arrived at by multiplying total distance km., by
average load quantity.
• In both the example, variable cost is dependent of
distance and is a quantitative factor. Since, the weight
carried does not affect the variable cost hence and is a
qualitative factor.
• To understand the concept of absolute ton-km., and
commercial ton-km., the following illustration may be
referred.
 Illustration 1

• A lorry starts with a load of 20 tonnes of goods from station

A. It unloads 8 tonnes at station B and rest of goods at station
C. It reaches back directly to station A after reloaded with 16
tonnes of goods at station C. The distance between A and B, B
to C and then from C to A are 80 km, 120km and 160 km
respectively.
Required:
• Compute Absolute tonne-km and Commercial tonne-km
• Absolute tonne-km = (20tons x 80km) +
(12tons x 120km) + (16 tons x 160km) =5600
tons-km
• Commercial tonne-km = (20+12+16)/3 x 360
= 5760 tons-km
Class Activity
The trainer should guide trainees to
calculate absolute tonne-km and
commercial tonne-km; and explain the
relevance of the same in transport costing
 Practice Questions

• QUESTION ONE

a) A lorry starts with a load of 22 tonnes of goods from station A. It

unloads 12 tonnes at station B and rest of goods at station C. It
reaches back directly to station A after reloaded with 18 tonnes
of goods at station C. The distance between A and B, B to C and
then from C to A are 90 km, 130km and 170 km respectively.

Required:

Compute Absolute tonne-km and Commercial tonne-km

b) If you were to set freight rate using mark-up,
which of the two parameters is more appropriate
and why?
• Suggested Solution
a)
- Absolute ton-kms = 22 tons x 90km+10 tons
x130km +18 tons x170 km =6340 ton-kms

- Commercial ton-kms (22+12+18)/3 x390 =

6760 ton-km
b) Total operating cost is usually divided by
the composite value “ton-km” to get cost of
transporting each ton per kilometer. Since the
cost per ton per km is an is used to set freight
rate (using margin) then the absolute ton-kms
is more appropriate because it gives a higher
total cost which will results to higher margin.
• QUESTION TWO
• After graduating from NIT, Joseph was assigned a
responsibility to supervise a bus which belongs to CHITA
Company Ltd. The bus shuttles between two towns which
are 25 Kilometers apart. The company has bought a brand
new bus for this route for TZS 75,600,000. The bus has to
be insured at 2.15% per annum and the company will pay
annual tax of TZS 550,000 in respect of the bus. Garage
rent is TZS 350,000 per month.
• Annual repairs will be TZS 1,500,000 and the bus is
likely to last for 10 years, at the end of which the
scrap value will be TZS 4, 200,000.
• The driver’s and conductor’s salaries will be TZS
200,000 and TZS 150,000 per month respectively.
Commission which is to be shared equally between
the driver and the conductor is 10% of total fixed and
variable cost. Sundry fixed office overhead allocated
for the bus operation is TZS 35,000 per month while
manager-cum-accountant’s salary will be TZS
600,000 per month.
• Diesel and oil be TZS 50,000 per hundred
Kilometres. The bus has seating capacity of 50
passengers and it makes two round trips per
day. The probability that there will be unused
capacity is 0.15. Except for repairs, diesel and
oil, which are to be treated as variable costs,
the rest are standing charges. The bus will
work on average for 24 days in a month.
• Regardless of other bus stops in between the
two towns, bus fare is charged on the basis of
the 25 Kilometres. Joseph is required to submit
to the management of the company cost and
profit analysis for the bus.
• Required:
• Assist Joseph on the following:
• a) Computing passenger-kilometres per annum

• b) Using appropriate operating cost statement,

calculate cost per passenger per kilometre
• c) Suppose the company sets a mark-up of
40.25%, compute profit per passenger per
kilometre
• d) Compute bus fare to be charged per
passenger per trip (assuming the same mark-
up set)
• Suggested solutions
a)Passenger-kilometres per annum:
• Formula:
W1. Passenger kms = No. of buses x
Distance per round trip x No. of round trips
per day x No. of days x capacity of the bus x
actual capacity utilized x 12
• 1 x 25km x2 x 2 trips x 24 days 50 x 0.85
x 12 = 1,224,000 Passenger-kilometres
 Computation of cost per passenger per kilometer:

Per passenger-
Particular Workings Per annum Km
Fixed costs: TZS TZS
Depreciation (75,600,000-4,200,000)/10 7,140,000.00
Insurance 75,600,000 x2.15% 1,625,400.00
Annual tax Given 550,000.00
Garage rent 350,000 x 12 4,200,000.00
Driver's salary 200,000 x 12 2,400,000.00
Conductor's salary 150,000 x 12 1,800,000.00
Manager's salary 600,000 x 12 7,200,000.00
Sundry Overhead 35,000 x 12 420,000.00
Total fixed costs 25,335,400.00

Variable costs:
Annual repairs Given 1,500,000.00
Diesel and oil 50,000 x (28,800/100) 14,400,000.00
Total variable costs 15,900,000.00
Total costs 41,235,400.00
Commission (10%) 4,123,540.00
Total grand costs 45,358,940.00 37.06
•
c) Profit = Price – Cost
• Price = Cost + Profit margin; which is 37.06
+ (40.25% x 37.06)
• =37.06 + 14.91665 = 51.9767
• Profit per passenger per kilometer =
51.9767 – 37.06 = TZS 14.92
• Or Simply 40.25% x 37.06 = TZS
14.92

d) Bus fare to be charged per trip = Fare

per km x total km
• = 51.9767 x 25 km =1,299.42/=
• QUESTION THREE
• A transport service company is running five
(5) buses between two towns which are 50
kilometres apart. Seating capacity of each bus
is 50 passengers. The following particulars
were obtained from their books for April,
2019:
Particulars Amount
(TZS)
Wage of drivers, conductors and 48,000,000
cleaners
Salaries of office staff 20,000,000
Diesel oil and other oil 70,000,000
Repairs and maintenance 16,000,000
Taxation, insurance etc. 32,000,000
Depreciation 52,000,000
Interest and other expenses 40,000,000
Total 278,000,000
• It has been established that passengers
carried were 75 per cent of seating
capacity. All buses ran on all days of the
month. Each bus has made one round trip
per day. All salaries and wages are
payable as fixed costs.
Required:
a)Determine passengers-kilometres for the
buses
b)Using appropriate operating cost
statement covering the fleet of five (5)
buses, calculate the cost per passengers-
kilometre
• Suggested Answer
• a) Passengers Kms
• W1: Passenger kms = No. of buses x
Distance per round trip x No. of round
trips per day x No. of days x capacity of
the bus x actual capacity utilized
• = 5Buses x 50 kms x2 x 50 passengers
x75% x30 days
• = 562,500 passenger kms
Operating Cost Statement for the Month of
April, 2017
Particulars Amount (Tshs) Per passenger-
km
A. Standing Charges (Fixed Cost)
Wage of drivers, conductors and cleaners 48,000,000
Salaries of office staff 20,000,000
Taxation, insurance etc. 32,000,000
Depreciation 52,000,000
Interest and other expenses 40,000,000
Total FC 192,000,000 341.33
B. Variable/Running and Maintenance Cost
Diesel oil and other oil 70,000,000
Repairs and maintenance 16,000,000
86,000,000 152.88
C. Total Cost:(A+B)
Cost per passenger km (Total Cost(C)/Passenger Kms Tshs278,000,000/562,500 494.21
(W1) passenger kms
QUESTION FOUR
• The Chief Accountant of Union Transport
Company prepared the following details in
respect of a truck of 5 tonne capacity:
Item Amount (TZS)
Cost of truck 45,000,000
Estimated life of truck 10 years

Diesel, oil, grease 37,500 per trip each way

Repairs and maintenance 50,000 per month

Driver’s wages 150,000 per month

Cleaner’s wages 25,000 per month
Insurance 480,000 per year
Tax 240,000 per year
General supervision 480,000 per year
charges
•The truck carries goods to and from the city
covering a distance of 50 km each way. In
outward trip, freight is available to the extent
of full capacity while on return 20% of
capacity. Assuming that the truck runs on
average of 25 days a month, on one trip basis
daily, compute the following:
a)Operating cost per tonne-km (stating any
relevant assumption(s))

b)Rate per tonne per trip that the company

should charge if a profit of 50% on freight
is to be earned
• QUESTION THREE
a) Operating cost per tonne-km:
• Tonne-km per month is given by:
• 6 tonnes x 50 km x 25 days = 7, 500 tonne-km (5
tonnes on outward trip and 1 tonne (20%) on
return trip).
• Assuming the scrape value of truck is nill,
depreciation = 45,000,000/10 = 4,500,000.
 Union Transport Company
Statement showing operating costs:
Per month Per tonne km
Fixed costs:
Driver’s wages 150,000
Cleaner’s wages 25,000
Insurance 40,000
General supervision 40,000
Taxes 20,000
Depreciation 375,000 650,000 86.67
Variable costs:
Disel, oil, grease 1,875,000
Repairs and maintenance 50,000 1,925,000 256.67
Operating costs 343.34
b) Freight rate:
• Cost per tone-km 343.34
• Profit per tone-km 343.34
• 686.68
 QUESTION FIVE

• Global Transport Ltd charges TZS 90,000 per ton for

its 6-tons truck lorry from city “A” to city “B”. The
charges for the return journey are TZS 84,000 per ton.
No concession or reduction in these rates is made for
any delivery of goods at intermediate station “C”. In
January 2022, the truck made 12 outward journeys
for city “B” with full load out of which 2 tons were
unloaded twice in the way at city “C”. The truck
carried a load of 8 tons in its return journey for 5
times but was once caught by police and TZS
120,000 was paid as fine.
• For the remaining trips the truck carried full load out
of which all the goods on load were unloaded once at
city “C”, but it returned without any load once only
from “C” station to “A” station. The distance from
city “A” to city “C” and city “B” are 140 kms and
300 kms respectively.
• Annual fixed costs and maintenance charges are TZS
60,000,000 and TZS 12,000,000 respectively.
Running charges spent during January 2022 are TZS
2,944,000.
• Required:
a)Using operating cost statement and other
relevant calculations, find out the cost per
absolute ton-kilometre
b)Calculate the revenue for January 2022
c)By preparing a simple income statement,
determine the profit for January 2022.
Suggested Answers
a) Operating cost statement
Per month Ton-km
TZS ‘000’ TZS ‘000’
Standing charges
Fixed costs per month 5,000 111.81
Maintenance charges
Maintenance costs 1,000 22.36
Running costs
Running charges 2,944 65.83
Cost per ton-kms 200
Notes:
………………140 km…………….C…………………..160km………
A B
…………………………………..300km………………………………
Outward trips:
i. From City A to City B: 10 trips x 300km x 6 tons = 18,000 tons-kms
ii. From City A to City C: 2 trips x 140 km x 6 tons = 1,680 tons-kms
iii. From City C to City B: 2 trips x 160km x4 tons = 1,280 tons-kms
20,960 tons-kms
Returns trips:
i. From City B to City A: 5 trips x 300km x8 tons = 12,000 tons-kms
i . From City B to City C: 1 trip x 160kms x 6 tons = 960 tons-kms
i i. Remaining trips (B to A): 6 trips x 300kms x 6 = 10,800 tons-kms
23,760 tons-kms
• Total = 20,960 +23,760 = 44,720 tons-kms
a) Revenue for January 2020 TZS ‘000’
12 trips x 90,000/= 6,480
(from City A to B)
5 trips x 8 tons x 84,000/= 3,360
(from City B to City)
1 trip x 6 tons x 84,000/= 504
(City B to City C)
6 trips x 6 tons x 84,000/= 3,024
13,368
a) Profit statement for January 2020 TZS ‘000’ TZS ‘000’
Revenue 13,368
Less:
Monthly expenses 8,944
Other indirect costs: (Police fine) 120 (9,064)
Net profit 4,322