Service Costing

Question 1:

Sai Travels owns a bus and operates a tourist service on daily basis. The bus starts from Sricity
to Kumbhakonam and returns to Sricity the same day. Distance between Sricity and
Kumbhakonam is 250 kms. This trip operates for 10 days in a month. The bus also plies for
another 10 days between Sricity and Nellore and returns to Sricity the same day; distance
between these two places is 200 kms. The bus makes local sight-seeing trips for 5 days in a
month, covering a total distance of 60 kms per day.

The following data are given:

Cost of bus: Rs. 3,50,000

Depreciation 25%
Driver’s salary Rs. 1200 p.m.
Conductor’s salary Rs. 1000 p.m.
Part-time clerk’s salary Rs. 400 p.m.; Insurance Rs. 1800 p.a.
Diesel consumption 4 kms per litre @ Rs. 8 per litre. Token tax Rs. 2400 p.a.
Permit fee Rs. 1000 p.m.
Lubricant oil Rs. 100 for every 200 kms
Repairs and maintenance Rs. 1,500 p.m. Normal capacity 50 persons.

While plying to and from Kunbhakonam the bus occupies 90% of the capacity and 80% when
it piles between Sricity to Nellore (both ways). In the city the bus runs full capacity. Passenger
Tax is 20% of net profit. Calculate the price to be charged to Kumbhakonam and Nellore from
Sricity, per passenger, if the profit required to be earned is 35 % on cost.
Question 2:

A lodging home is being run in a small hill station with 50 single rooms. The home offers
concessional rates during six off-season months in a year. During this period, half of the full
room rent is changed. The management’s profit margin is targeted at 20% of the room rent.
The following are the cost estimates and other details for the year ending 31st March, 2016
(assume a month to be of 30 days):

(a) Occupancy during the season is 80%, in off-season 40%

(b) Expenses:
(i) Staff salary (except room attendants) Rs. 275,000
(ii) Repair to buildings 130,500
(iii) Laundry and linen 40,000
(iv) Interior and tapestry 87,500
(v) Sundry expenses 95,400

(c) Annual depreciation is to be provided for buildings at 5% and on furniture and

equipments at 15%, on straight line basis

(d) Room attendants are paid Rs. 5 per room-day on the basis of occupancy of the rooms
in a month

(e) Mothly lighting charges are Rs. 120 per room, except in four months of winter when it
is Rs. 30 per room and this cost is on the basis of full occupancy for a month; and

(f) Total investments in the home is Rs. 100 lakhs of which Rs. 80 lakhs relate to buildings
and balance for furniture and equipments.

You are required to work out the room rent chargeable per day both during the season and the
off-season months, on the basis of the foregoing information.