Transport & Service Costing

Topics: Cost, Costs, Variable cost Pages: 5 (1071 words) Published: March 13, 2011
Transport & Service costing Service Costing
Unit costing is the method of costing used when the cost units are identical. Identical cost units should have identical costs and this concept of equality of costs is the basic feature of unit costing.  

It may be noted that process costs, output costing and service costing are the sub-divisions of unit costing method.  
Service Costing – Nature and Problem:
Service or operating cost is the cost of providing services. Service costing is the term applied to describe the system used to find the cost of performing a service such as transport, gas or electricity. Service costs are particularly suitable for the costing of road and rail transport services an they are also utilized by electricity undertaking, hospitals, canteen, boiler house, etc. the method of costing is different from that used in connection with production, and the difference lies chiefly in the manner of assembling the cost data and finally in its allocation to cost units. The principle of service or operating costing is to accumulate costs under suitable headings and to express them in terms of the unit of service rendered.  

Service Costing In Different Undertakings:
Service costing is similar to output costing. All costs are suitably classified under fixed and variable. These costs are then collected, analyzed and expressed in terms of an appropriate cost unit. The classification of costs into fixed and variable is very important, as it draws management’s attention to the fixed costs to which they are committed regardless of the units of service ultimately given. It also indicates the change in the cost structure due to change in the operating level. |

Transport Costing: 

In transport undertakings most of the statistical data required for cost finding and cost control purposes are obtained from Daily Log Report.

All repairing and maintenance work are recorded on repair tickets and are then costed.

  In order to prepare a Transport Cost Sheet for a transport undertaking the costs may be subdivided as under:-  a) Wages and running costs: - These include cost of petrol, oil, grease, wages of assistants and drivers, etc. b) Maintenance charges: - These include repairs and overhauling of vehicles, garage charges, tyres, etc.c) Fixed charges: - These fixed expenses include insurance, license, depreciation, etc.  The statistical data regarding costs, maintenance and performance are helpful in preparing a performance in respect of each vehicle.In order to compare the operating efficiency for each period, the total costs thus arrived at are divided by the bases such as number of hours or days, number of kilometers run, number of commercial ton-kilometers, etc. Costs per unit thus obtained are compared with the past result. A monthly Vehicle Cost Sheet and Performance Statement are generally used in many transport undertakings.

Cost control is always possible by means of comparison of actual performance with the budgeted performance. Various control measures, viz., securing the optimum use of vehicles, regular maintenance as a planned operation, avoidance of loading and unloading delays prevention of overlapping and duplicated journeys, planned replacement of vehicles, etc., may be instituted. 

Where transport department is treated as service department all costs are collected and apportioned to other departments on the basis of commercial ton-kms. The haulage of incoming material might be charged as an addition to cost of raw material, and the haulage of fabricated goods to customers becomes a part of distribution overhead.

Generally, commercial ton-km, is obtained by multiplying the total tonnage carried by the kilometers traveled and dividing the product by two. This is done where the vehicles return empty as is found in most cases.  

Industrial Visit to Adhunik Transport Organization Limited

The visit was made to Adhunik Transport...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Transport Uitm Essay
  • Sustainable Transport Leicester Essay
  • Customer Perception of Services Provided by Public Sector Road Transport Essay
  • Transport Problems in Mauritius Essay
  • Transport: Train Station and Passengers Essay
  • Public Transport and Car Travelling Essay
  • disadvantages of public transport Essay
  • Problems in Public Transport Essay

Become a StudyMode Member

Sign Up - It's Free