CA Intermediate · Cost and Management Accounting · Service Costing
Kaveri Travels runs a bus on a route of 120 km one way, making 2 round trips daily for 25 days in a month. The bus has 40 seats and on average 75% of seats are occupied. Total monthly cost is Rs 5,40,000. What is the cost per passenger-km?
The cost per passenger-km is Rs 1.50. The bus runs 120 x 2 x 2 = 480 km a day, or 12,000 km a month, carrying 30 passengers on average, giving 3,60,000 passenger-km. Dividing Rs 5,40,000 by this figure gives Rs 1.50.
- ARs 1.25
- BRs 0.94
- CRs 1.50Correct
- DRs 2.00
Explanation
Km per day = 120 x 2 (round trip) x 2 trips = 480; per month = 480 x 25 = 12,000 km. Passengers carried = 40 x 75% = 30. Passenger-km = 12,000 x 30 = 3,60,000. Cost per passenger-km = 5,40,000 / 3,60,000 = Rs 1.50. Rs 2.00 results from using only 120 x 2 x 25 = 6,000 km... that gives 1,80,000 passenger-km and Rs 3.00, so Rs 2.00 is not that; it comes from ignoring occupancy partially. Working check: 3,60,000 x 1.50 = 5,40,000.
Did you get it right without looking?
One question tells you little. A timed set on Service Costing shows your real accuracy, how long you take and where you lose marks.
More Service Costing questions
- A hospital's cost accountant wants to compare the cost of running its in-patient ward across months with varying occupancy. Which composite …
- Kaveri Travels runs a bus on a route of 150 km one way. Seating capacity is 40. The bus makes 2 round trips daily for 25 days in a month. Oc…
- Ganga Travels operates a bus with 40 passenger seats on a route. In a month, the bus runs 25 days, makes 4 round trips per day, and each rou…
- Sunrise Hospital runs a 50-bed ward. Monthly costs: nursing staff Rs 6,00,000, ward consumables Rs 1,50,000, depreciation Rs 2,25,000, and a…
- Which of the following statements about service costing is correct?
- A school canteen run by Annapurna Caterers served 12,000 meals in a month. Fixed costs were Rs 1,80,000 and variable cost was Rs 25 per meal…