CMA Intermediate · Cost Accounting · Operating Costing - Transport, Hotel and Healthcare
A bus costing Rs 12,00,000 is depreciated on straight line over 5 years with no residual value. Insurance is Rs 36,000 per year and road tax Rs 24,000 per year. The bus runs 20,000 km per month. Considering only these three items, what is the standing cost per km?
Standing cost is Rs 1.25 per km. Annual depreciation of Rs 2,40,000 plus insurance of Rs 36,000 and road tax of Rs 24,000 totals Rs 3,00,000, which divided by 2,40,000 annual kilometres gives the rate.
- ARs 1.00
- BRs 1.25Correct
- CRs 0.85
- DRs 1.40
Explanation
Annual depreciation = 12,00,000 / 5 = 2,40,000. Add insurance 36,000 and tax 24,000 = 3,00,000 per year. Annual km = 20,000 x 12 = 2,40,000. Cost per km = 3,00,000 / 2,40,000 = Rs 1.25. Rs 1.00 results from omitting insurance and tax.
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