Page 27 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes Penske’s successful international transportation management solution continues to provide
value for Knoll. Improved route optimization efforts reduce air/ocean transportation
costs, as well as cycle times.
Currently, Knoll’s planning and buying teams receive multiple updates weekly of all
open international shipments. The added visibility and control over Asian shipments
encourages Knoll to increase its Asian supplier base. As Knoll’s supply chain continues to
grow and expand to other regions of the globe, Penske’s solution will adapt to the new
challenges while minimizing costs and inefficiencies.
Questions:
1. What steps would you suggest to reduce international transportation costs?
2. List various steps to increase overall visibility throughout Knoll’s supply chain.

Source: www.penskelogistics.com/pdfs/07_knoll_case_study_2.pdf
1.5 Summary

 Service sector companies provide their customers with services or intangible products.
 The activities of service sector may be used for both: (i) Provision of services to outside
customers (ii) Provision of services internally (i.e. captive consumption).

 The types of services that may be provided, by service sector are of diverse nature and
have their own peculiarities and requirements in respect of the cost accounting treatment.
 The Terminology of CLMA defines Service Costing as the cost of specific services and
functions, e.g., maintenance, personnel, canteen etc. These may be referred to as service
centres, departments or functions.
 Service costing involves the method of determination of the cost of services.

 At the end of specified periods, collection of operating costs takes place and the aggregate
of these costs is duly divided by the quantity of services provided in the period. This gives
the cost per unit.
 Service organisations/internal service departments render a variety of services.
 Owing to the peculiarities of services, different cost accounting treatment is required.

1.6 Keywords

Costing of Hospital: It is related to ascertaining the cost of medical services rendered by a
nursing home or dispensary belonging to an industry or organisation.
Daily Log Sheet or Log Book: It is maintained for each vehicle to record details of each trip.
Fixed or Standing Charges: These are expenses which are more or less fixed nature.
Internal Services: Departments within organisations render services to the production department
and also to other departments.
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.
Service Costing: The Terminology of CLMA defines Service Costing as the cost of specific services
and functions, e.g., maintenance, personnel, canteen, etc.

Service Organisations: Organisations which are engaged in the business of rendering services
to outsiders with the view to earning profit are known as service organisations.

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