CA Intermediate · Cost and Management Accounting · Service Costing
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. Occupancy is 80% on average. Total monthly operating cost is Rs 9,60,000 and the operator wants a profit of 20% on takings (revenue). Fare per passenger for a one-way journey of the full route (rounded as computed, no rounding needed) is:
The fare is Rs 375. There are 100 one-way trips a month with 32 passengers each, giving 3,200 passengers. With profit at 20% of takings, revenue is 9,60,000 divided by 0.80, which is Rs 12,00,000, and dividing by 3,200 gives Rs 375.
- ARs 300Correct
- BRs 250
- CRs 375
- DRs 240
Explanation
One-way trips per month = 2 round trips x 2 x 25 = 100. Passengers per one-way trip = 40 x 80% = 32, so total passengers = 3,200. Revenue needed = 9,60,000 / 0.80 = Rs 12,00,000. Fare = 12,00,000 / 3,200 = Rs 375. Check: 3,200 x 375 = 12,00,000, less 20% profit = 9,60,000 cost. So Rs 375 is correct; Rs 300 is wrong as it adds 20% on cost only is 11,52,000/3,200 = 360, not 300.
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