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CA Intermediate · Cost and Management Accounting · Service Costing

Vikram Logistics operates a truck carrying goods on a round trip between Pune and Nagpur, 600 km each way. Outward it carries 10 tonnes; on the return it carries 6 tonnes. The truck makes 4 round trips in the month. Fixed cost for the month is Rs 48,000 and running cost is Rs 5 per km of total distance run. The company wants a profit of 20% on the revenue. What freight per tonne-km should it charge to achieve this (to 2 decimals)?

This question's listed options do not match the computed rate of Rs 2.34, so it should not be used.

  1. ARs 1.25Correct
  2. BRs 1.00
  3. CRs 0.80
  4. DRs 1.50

Explanation

Total km = 4 x 1,200 = 4,800. Running cost = 4,800 x 5 = 24,000; total cost = 72,000. Tonne-km = 4 x (600x10 + 600x6) = 4 x 9,600 = 38,400. Profit 20% on revenue means cost is 80% of revenue, so revenue = 72,000 / 0.8 = 90,000. Rate = 90,000 / 38,400 = Rs 2.34. Recheck: 38,400 x 2.34 is about 89,856, so the rate is Rs 2.34, not any listed value; hence recompute options: cost per tonne-km = 72,000/38,400 = Rs 1.875.

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