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Unit 1: Service Costing
These are discussed in detail as below: Notes
(i) Fixed or Standing Charges: These are expenses which are more or less fixed nature. For
example, in case transport service, road licence fee, garage rent, insurance premium, taxes,
depreciation, interest on capital, salary to driver-conductors-cleaners, general supervision
charges, establishment expenses, etc. are standing charges. In case of Nursing home and
Hospital, the depreciations pertaining to the cost of building, equipment, beds, insurance,
etc. are fixed charges.
Note These expenses are constant and are incurred irrespective of the extent of service.
(ii) Maintenance or Semi-variable Charges: They are semi-variable or semi-fixed in nature.
They include expenditure on repairs and maintenance, spares and accessories, tyres and
tubes, painting charges, telephone charges, etc.
(iii) Running or Variable Charges: These are variable cost and variable nature. Running charges
are expenses which are incurred on the actual running of the vehicle. For example, in case
of hospital, the cost of medicine, laundry, etc., will represent the running charges. In case
of transport service petrol, diesel, grease, oil, salaries and wages to drivers, conductors
and cleaners on the basis of distance, depreciation calculated on the basis of mileage or
kilometres run are running or variable charges.
The classification of various items of costs into the above three categories should not be attempted
as a matter of rule. It depends basically on the nature of each case.
Self Assessment
State whether the following statements are true or false:
6. Running charges are expenses which are more or less fixed nature.
7. Maintenance or semi-variable charges are semi-variable or semi-fixed in nature.
8. Fixed or standing charges are expenses which are incurred on the actual running of the
vehicle.
1.4.1 Transport Costing
The transport costing refers to the determination of the cost per unit of service i.e., cost of per
passenger – kilometre and the cost of per tone – kilometre.
Suppose the following information is given:
Number of trucks 10 of 5 tons each
Number of km. run per day 50 km.
Effective days in a month 25
Wastage on loading capacity 10%
Percentage of trucks laid for maintenance 10%
Now, number of effective km. = 10 × 5 × 50 × 25 × 90/100 × 90/100 = 50,625 km.
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