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CMA Intermediate · Cost Accounting · Operating Costing - Transport, Hotel and Healthcare

Which of the following is the most distinguishing feature of operating costing compared with job costing?

Operating costing is distinguished by ascertaining cost per unit of service rendered, often a composite unit such as passenger-km. Job costing instead collects cost for each separate order. Service industries have little material and no stored output, so those other features do not characterise operating costing.

  1. ACosts are accumulated for each distinct customer order
  2. BCosts are ascertained per unit of service rendered, using a composite unitCorrect
  3. CMaterial cost forms the largest element of total cost
  4. DWork-in-progress is valued at the end of every period

Explanation

Operating costing is used by service undertakings and expresses cost per unit of service such as passenger-km or room-day. Job costing accumulates cost for each customer order, so option A describes job costing. Services have no material-dominated output or work-in-progress, so C and D do not distinguish it.

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