Page 9 - DCOM206_COST_ACCOUNTING_II

Cost Accounting – II

Notes Self Assessment

Fill in the blanks:
1. Service costing involves the method of determination of the cost of …………………….
2. …………………… is also called ‘Operating Costing’.
3. Service organisations do not produce …………………… goods.

4. …………………… organisations are engaged in the business of rendering services to
outsiders with the view to earning profit are known as service organisations.
5. …………………… services departments within organisations render services to the
production department and also to other departments.

1.4 Evaluation of Cost of Various Service Organisations

Service costing or operating costing is applied to the following undertakings:
(i) Transport undertakings,
(ii) Electricity undertakings,

(iii) Hotel undertakings,
(iv) Hospital and Nursing homes,
(v) Canteen services,
(vi) Cinema companies,
(vii) Municipal services,
(viii) Educational institutions,

(ix) Public libraries, and
(x) Distribution services.
Following are some examples of operating cost unit:

Service Organisations Cost Unit
Goods transport Per tonne km.
Passenger transport Per passenger km.
Electricity Per kilowatt hour (kwh)
Hotel Per room per day
Hospital and Nursing homes Per bed per day
Canteen Per meal or per lunch or per dinner or per dish
Cinema Per sheet per show
Water supply Per 1000 gallon water
Boiler houses Kilograms of steam supplied
Road maintenance Per kilometre

Operating costs are classified into the following three categories:
(i) Fixed or Standing Charges,
(ii) Maintenance or Semi-variable charges, and
(iii) Running or Variable Charges.

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