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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cost, Cost Centre, Cost Unit and Cost Drivers

A Kolkata bus operator incurs a total operating cost of Rs 2,40,000 in a month. The fleet runs 4,000 km with an average of 30 passengers carried over the whole distance. Using the passenger-kilometre as cost unit, the cost per passenger-km is:

The cost per passenger-kilometre is Rs 2.00. Total passenger-kilometres are 30 passengers times 4,000 km, giving 1,20,000, and dividing the Rs 2,40,000 cost by this figure gives Rs 2. Dividing by kilometres alone would ignore the passengers carried.

  1. ARs 60.00
  2. BRs 8.00
  3. CRs 2.00Correct
  4. DRs 1.80

Explanation

Passenger-km = 30 x 4,000 = 1,20,000. Cost per unit = 2,40,000 / 1,20,000 = Rs 2.00. Rs 60 divides only by km, ignoring passengers. Rs 8 divides by passengers alone.

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