Ph: 98851 25025/26 www.mastermindsindia.

com
3. OPERATING COSTING
SOLUTIONS TO ASSIGNMENT PROBLEMS
Problem No.1
Calculation of passenger km:-
Onward: 25 days x 3 trips x 20 km x 12 months 18,000 x 40 passengers
7,20,000 pass. Km.
Return: 25 days x 3 trips x 20 km x 12 months 18,000 x 40 passengers
7,20,000 pass. Km
14,40,000
Kilometers 36,000kms

Calculation of Total cost:

Particulars Amount
Depreciation (1,00,000 / 5) 20,000
Insurance (1,00,000 x 3%) 3,000
Annual Road tax 2,000
Garage rent (400 x 12m) 4,800
Annual repairs 2,360
Salary to driver & conductor (800 x 12m) 9,600
Manager Salary (1,400 x 12m) 16,800
Stationery (100 x 12m) 12,000
Petrol & oil cost (3600 x 50 / 100) 18,000
Total cost before commission 77,760
(+) commission (10% on takings) 10,368
Total Cost 88,128
(+) Profit (15% on takings) 15,552
Total takings 1,03,680

1,03,680
Fare/ pass. Km Rs. 0.072 / pass.Km
14,40,000

Problem No. 2

Calculation of Total kms. covered per month:

Bus Route Km. per trip Trips per day Days per month Km. per month
Delhi to Chandigarh 250 2 8 4,000
Delhi to Agra 210 2 10 4,200
Delhi to Jaipur 270 2 6 3,240
11,440

IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________8

 No.1 for CA/CWA & MEC/CEC MASTER MINDS
Calculation of Passenger kms. per month:

Total seats Capacity Km. per Passenger

available per utilized trip Km. per
month (100% % Seats month
capacity)
Delhi to Chandigarh & 800 * 90 720 250 1,80,000
Back
Delhi to Agra & Back 1,000 @ 85 850 210 1,78,500
Delhi to Jaipur & Back 600 # 100 600 270 1,62,000
Total 5,20,500

* 50 seats X 2 trips X 8 days = 800 seats

@ 50 seats X 2 trips X 10 days = 1,000 seats
# 50 seats X 2 trips X 6 days = 600 seats

Now, the operating cost can be found out as under:

Monthly Operating Cost Statement

Variable Costs Rs. Rs.
(i) Running Costs:
Diesel [(11,440 km ÷ 4 km) X Rs. 46] 1,31,560
Lubricant oil [(11,440 km ÷ 100) × Rs. 10] 1144 1,32,704
(ii) Maintenance Costs:
Repairs & Maintenance 1,000
(iii) Standing charges:
Salary of driver 2,800
Salary of conductor 2,200
Salary of part-time accountant 200
Insurance (Rs. 4,800 ÷12) 400
Road tax (Rs. 1,500 ÷12) 125
Permit fee 315
Depreciation (Rs. 6,00,000 × 20%) ÷ 12 10,000 16,040
Total costs per month (i)+(ii)+(iii) 1,49,744
Profit and Passenger tax @ 100% of cost (Note below) 1,49,744
Total takings per month 2,99,488
Passenger km. per month 5,20,500

Rate per passenger km. = (Rs. 2,99,488 ÷ 5,20,500) = Rs. 0.575 say Rs. 0.58

Proposed fare to be charged per passenger km.

Delhi to Chandigarh = Rs. 0.58 × 250 km = Rs. 145.00
Delhi to Agra = Rs. 0.58 × 210 km = Rs. 121.80
Delhi to Jaipur = Rs. 0.58 × 270 km = Rs. 156.60

Note:
1. Passenger tax = 20% of total takings
2. Profit = 30% of total takings
IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________9
 Ph: 98851 25025/26 www.mastermindsindia.com
3. Passenger tax + Profit = 50% of total takings
4. Cost (balance) = 50%
5. Total takings = 100%
6. Item 3 as a % of item 4 = 100%
Passenger tax (20% of Rs. 2,99,488) = Rs. 59,897.60
Profit (30% of Rs. 2,99,488) = Rs. 89,846.40
Rs. 1,49,744.00

Problem No.3
Step-I:

Calculation of total km & passenger kms:

Guntur to Tirupathi 10 days X 250 kms X 2 = 5000 km X 50 pass X 90% = 2,25,000 pass. km
Guntur to Kalahasthi 10 days X 200 kms X 2 = 4000 km X 50 pass X 80% = 1,60,000 pass. km
Local Trip: 5 days X 60 km = 300 km X 50 pass = 4,00,000 pass. km

9300 km 4,00,000 pass. km

Step-II:

Calculation of total cost for the month:

Particulars Amount
Depreciation (3,50,000 X 25% X 1/12) 7,292
Drivers Salary 1,200
Conductors Salary 1,000
Part time clerk Salary 400
Insurance (1800 X 1/12) 150
Diesel Consumption (9,300 X 8/4) 18,600
Token tax 200
Permit fee 1,000
Lubricant oil (9,300 X 100 / 200) 4,650
Repairs & Maintenance 1,500
Total cost before passenger tax (46.67%) 35,992
(+) Passenger tax (20% on takings) (20%) 15,424
Total cost (66.67%) 51,416
(+) Profit (1/3 on takings) (33.33%) 25,704
Total takings (100%) 77,120

Step-III:
77,120
Fare / Passengers km pass.km=Rs. 0.1928 / pass. km
4,00,000
Fare / Passenger from Guntur to Tirupathi = 250 p. km x 0.1928 Rs. 48.20
Fare / Passenger from Guntur to Kalahasthi = 200 p. km x 0.1928 Rs. 38.56

IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________10

 No.1 for CA/CWA & MEC/CEC MASTER MINDS
Problem No.4
Statement showing fare per passenger Km.
Particulars Amount Amount
→ standing charges (Fixed cost)
1800000 − 120000 1
Depreciation  x  9333.33
 15 12 
1800000  4500
Insurance charges  x3%
 12 
Manager cum Accountant salary 8000
 50,000 
Annual tax   4166.67
 12 
Garage rent 2500 28500
→ Maintenance charge [ semi var. c]
150,000 
Repairs & Maintenance  12500
 12 
→ Running cost
Drivers salary 15000
Conductor’s salary 12000
Stationery 500
 2500 
Engine oil & lubricants  x3000  6250
 1200 
 52  15600 49350
Diesel & oil  x3000km 
 10km 
Total cost excluding commission to driver & conductor 90350 75
(+) commission @ 10% on taking 6023.33 10
(+) profit @ 15% on takings 18070 15(100 x 15%)
Takings (a) 120466.67 100(let)

No of passenger km (b) = 120000

(3hrs x 2 x 20 km x 25 day = 3000 km x 40 passenger)
Fare per passenger km (a/b) = Rs.1.004

Problem No.5
Step-I:

Calculation of absolute ton km:

Vehicles x trips x km x tons x capacity
30 x 5 x 6 x 5 T x 50% 2,250 T.km x 30 days 67,500 T.km
40 x 5 x 6 x 3 T x 50% 1,800 T.km x 30 days 54,000 T.km
50 x 5 x 6 x 2 T x 50% 1,500 T.km x 30 days 45,000 T.km
40 x 5 x 6 x 4 T x 50% 2,400 T.km x 30 days 72,000 T.km
2,38,500 T.km
(-) 10% laid up for repairs 23,850 T.km
2,14,650 T.km

Step-II:

IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________11

 Ph: 98851 25025/26 www.mastermindsindia.com
Calculation of total cost for the month:

Salary to superintendent (1,800 x 50%) 900

Salary to foremen (4 x 600) 2,400
Wages for drivers (200 x 100) 20,000
Wages for labourers (80 x 300) 24,000
Consumables 20,000
Petrol 80,000
Lubricants 10,000
Replacement of tyres 6,000
Garage Rent 2,500
Gas 800
Miscellaneous 15,000
Workshop Expenses 15,000
Total Cost 1,96,600

Step-III:
Copy Rights Reserved
Calculation of cost % T.km
1,96,600
To MASTER MINDS, Guntur
Cost / T.km Rs. 0.92/ T.km
2,14,650

Problem No.6
Step-I:

Calculation of total km & Tons km:

Vehicle Journey x distance x days x weeks km x tones T.km
1 6 x 10 km x 5 x 50 15,000 x 4T 60,000 T.km
2 4 x 20 km x 5 x50 20,000 x 4T 80,000 T.km
3 2 x 40 km x 5 x 50 20,000 x 5T 1,00,000 T.km
4 2 x 30 km x 5 x 50 15,000 x 6T 90,000 T.km
5 1 x 60 km x 5 x 50 15,000 x 6T 90,000 T.km
Onward 85,000 km 4,20,000 T.km
(+) Return 85,000 km 0 T.km
Total 1,70,000 km 4,20,000 T.km

Step-II:

Calculation of Total cost for the year:

Maintenance Cost ( for 1,70,000 kms) 1,35,000
Drivers wages (600 x 50 weeks x 5 drivers) 1,50,000
Supervisors Salary (800 x 50 weeks) 40,000
Depreciation on loading equipment (1,00,000/5 Years) 20,000
30,000 x 5 30,000
Depreciation on Vehicles ( )
5 Years

IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________12

 No.1 for CA/CWA & MEC/CEC MASTER MINDS
Petrol (1,70,000 x Rs. 8) 13,60,000
Repairs (1,70,000 x Rs. 1) 1,70,000
Insurance (2,400 x 5 vehicles) 12,000
License Cost (1,600 x 5 vehicles) 8,000
Tyres Cost 18,000
Miscellaneous Cost 17,000
Total Cost 19,60,000

Step-III:
Calculation of cost / Tons km
19,60,000
Cost / Tons km = = Rs. 4.67/T.km
4,20,000T.km

Problem No. 7
Statement showing operating cost
Particulars Per bus/p.a 5 buses/p.a
Standard charges(fixed cost)
Driver’s salary @ 4500 P.M 54000 270000
(4500 x 12) (4500 x 12 x 5)
Cleaner’s salary @ 3500 P.M 8500 42000
License fee, Taxes etc @ 8600 p.a 8600 43000
Insurance @ 10,000 p.a 10000 50000
Depreciation @ 1,00,000 p.a 100000 100000
Maintenance charges
Repirs & maintenance @ 35000 p.a 35000 175000
Operating charges:
Diesel 162000 810000
Rs.45 (162000 x 5)
(8km x 4 times x 2 way x 25 day x 9 months) x
4
total cost 3780000 1890000
Cost per month (a) 31500 157500

No of students on half fare bases (b) 150 750

(50 x 50% x 2 + 50 x 50%) x 2 (150 x 5)
Cost per student (half fare)
(a/b) 210 210
Cost per student( full fare) 420 420
(210 x 2)

Problem No. 8
(i) Total equivalent single room suites
Nature of suite Occupancy Equivalent single room suites
Single room suites 100 × 360 × 100% = 36,000 36,000 × 1 = 36,000
Double rooms suites 50 × 360 × 80% = 14,400 14,400 × 2.5 = 36,000
Triple rooms suites 30 × 360 × 60% = 6,480 6,480 × 5 = 32,400
Total 1,04,400

(ii) Statement of total cost:

IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________13

 Ph: 98851 25025/26 www.mastermindsindia.com
Rs.
Staff salaries 14,25,000
Room attendant’s wages 4,50,000
Lighting, heating and power 2,15,000
Repairs and renovation 1,23,500
Laundry charges 80,500
Interior decoration 74,000
Sundries 1,53,000
25,21,000
Building rent 10,000 × 12 + 5% on total taking 1,20,000
+ 5% on takings
Total cost 26,41,000 + 5% on total takings

Profit is 20% of total takings

∴ Total takings = Rs. 26,41,000 + 25% of total takings
Let x be rent for single room suite
Then 1,04,400 x = 26,41,000 + 25% of (1,04,400 x)
or 1,04,400 x = 26,41,000 + 26,100 x
or 78,300 x = 26,41,000
or x = 33.73

(iii) Rent to be charged for single room suite = Rs. 33.73

Rent for double rooms suites Rs. 33.73 × 2.5 = Rs. 84.325
Rent for triple rooms suites Rs. 33.73 × 5 = Rs. 168.65

Problem No.9
Calculation of cost per kwh:
Operating labour 50,000
Repairs & maintenance 50,000
Lubricants, spares & stores 40,000
Plant super vision 30,000
AOH 20,000
Coal (10,00,000 x 2.5 x 0.02) 50,000
Depreciation 10,000
Total Cost 2,50,000
2,50,000
Cost per kwh = = 0.25
10,00,000

Problem No. 10
Calculation of cost per Km. under various proposals

Existing Proposal: Own a car

Particulars Calculations Cost/Km

Depreciation  50,000 - 10,000 
 p.a ÷ (2000 ×12 m) 0.33 ps.
 5 

IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________14

 No.1 for CA/CWA & MEC/CEC MASTER MINDS
Petrol & Oil -
Tyres - 0.65 ps.
Repairs - 0.08 ps.
560 0.07 ps.
Taxes 24,000 Km 0.10 ps.

0.02 ps.
Driver wages 720
2,000 Km 0.36 ps.
Total Cost Rs.1.61 ps.
Proposal – 1: Car taken on Hire basis
Particulars Calculations Cost /Km
Hire charges 800/ -
2,000 km 0.40 ps.
Petrol 0.65 ps.
-
Oil 0.08 ps.
-
Tyres 0.07 ps.
-
Total Cost Rs. 1.20 ps.

Proposal - 2: Employee’s own car

Particulars Calculations Cost/km.
Cost of interest 25,000 × 18%
24,000 Km 0.19 ps.
-
Petrol 500 0.65 ps.

Maintenance & Drivers wages 2,000 Km 0.25 ps.

Total Cost Rs.1.09 ps.

Ranking of three proposals basing on Cost per Km.

Particulars Cost per Km. Rank
Existing Proposal 1.61ps III
Proposal - 1 1.20ps II
Proposal – 2 1.09ps I

Decision: As cost per unit in proposal - 2 is less, it is better to accept that proposal.

Problem No. 11

Particulars Present Situation Fare Reduction Proposal

Number of Passengers 160 x 60% = 96 Given = 108
Gross Revenue per Flight 96x 7,200 = 6,91,200 108 x 6,720 = 7,25,760
Less: Variable Costs per Flight
Fuel 96,000 96,000
Food to Passengers 96 x 125 = 12,000 108 x 125 = 13,500
Commission at 5% of Gross 34,560 36,288
Revenue
Contribution per Flight 5,48,640 5,79,972
Less: Fixed Costs per Flight
IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________15
 Ph: 98851 25025/26 www.mastermindsindia.com
Aircraft Lease 3,50,000 3,50,000
Landing Charges 72,000 72,000
Net Operating Income per Flight 1,26,640 1,57,972

Decision: The Fare Reduction Proposal (and consequent increase in the number of passengers) will
increase the Operating Income per Flight by Rs.1,57,972 - Rs.1,26,640 = Rs.31,332. Hence, the
proposal is worthwhile.

Problem No.12

Step-1: Calculation of total Absolute tonne Kms.

40km 60km
P → Q : 40 Kms. × 10 tonne = 400 tonne Kms
Q → R : 60 Kms. × 6 tonne = 360 tonne Kms
→ Q → R
10T 6T
R → P : 80 Kms. × 8 tonne = 640 tonne Kms P
← 
Total =1400 tonne Kms. 8T
∴ Absolute tonne Kms. =1,400 80km

Step -2: Calculation of Commercial tonne Kms.

Aggregate distance × Average tonnage
 10 + 6 + 8 
= (40+60+80) ×   = 180 × 8 = 1440 tonne Kms.
 3 

∴ Commercial tonne Kms. = 1440

THE END

IPCC_34e_Costing _ Operating Costing_ Assignment Solutions ____________16