CMA Final · Cost and Management Audit · Audit of Different Service Organisations
While auditing a transport service organisation operating a fleet of trucks, the auditor finds that the cost per tonne-km is computed using total tonnes carried multiplied by the route distance for loaded trips only, ignoring empty return trips. Which observation is most appropriate?
The cost of empty return trips must still be included in the total cost, even though tonne-km output is measured on loaded carriage. Fuel, wages and wear are incurred on empty runs, so excluding them understates the cost per tonne-km.
- AThe method is correct since empty trips earn no revenue and carry no cost
- BAbsolute tonne-km should be based on actual load and distance, but the cost of empty running must still be included in the cost poolCorrect
- CCommercial tonne-km should be computed by taking the average load multiplied by total distance, with empty trips excluded from cost
- DCost per tonne-km should be replaced by cost per vehicle owned
Explanation
Empty running still consumes fuel, driver wages and wear. The tonne-km denominator reflects output on loaded trips, but the numerator must include all operating cost including empty return trips. Excluding that cost would understate cost per tonne-km.
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