Top 25 Questions and Answers-Operating Costing [With PDF]

In this article, you will learn the “top 25 Questions and Answers-Operating Costing”. After reading this post, you will have a basic understanding of operating costing, which will aid in the development of your accounting skills.

So let’s get started.

Questions and Answers-Operating Costing

Question-01: What is operating costing?

Answer: Operating costing is a method of calculating costs for businesses that offer services rather than produce goods.

Question-02: What industries are great choices for operational costing?

Answer: The following sectors are great choices for operating costing:

  • Transport Service
  • Water Supplies
  • Electricity Suppliers
  • Hospitals, Canteens
  • Colleges etc.

Question-03: What are the most important characteristics of operating costing?

Answer: The following are the main characteristics of operating costing:

  • Costs are expressed in double units, such as passenger-kilometer, ton-kilometer, kilowatt-hour, and so on. These products can be used for a variety of goods transportation services, airlines, and passenger bus services, among other things.
  • Costs are calculated at the end of a specified time within the operating costing system. For operating costing, the perpetual system is neither applicable nor feasible.

Question-04: What are the benefits or advantages of operating costing?

Answer: The following are the advantages or benefits of operating costing:

  • It’s easy to keep track of regular or fluctuating variable expenditures.
  • Waste can be avoided with proper management.
  • The inter-department can be balanced by comparing them to other departments.

Question-05: How many categories of operating costs are there? And what are they?

Answer: there are three categories of operating costs which are as follows:

  • Running Costs
  • Maintenance Costs
  • Fixed or standard Costs

Question-06: What are the examples of running costs?

Answer: The examples of running costs are as follows:

Cost of petrol, diesel, lubricating oil, grease, the toll token in the bridge, etc.

Question-07: What are the examples of maintenance costs?

Answer: The examples of maintenance costs are as follows:

Cost of tires and tubes, Repairs and paintings, spares and accessories, etc.

Question-08: What are the examples of fixed or standard costs?

Answer: The examples of fixed or standard costs are as follows:

Garage rent, insurance of the vehicle, road license, annual depreciation, the salary of office manager, etc.

Question-09: In operating costing, what are the two types of cost units?

Answer: In operating costing, there are two types of cost units:

  • Simple cost unit
  • Composite cost unit.

Question-10: What is a single unit?

Answer: A single unit is an element made up of only one unit. For example, per year, per mile, per hour, per month, and so on.

Question-11: What are composite units?

Answer: Composite units are elements that are made up of several composites and play an important role in distribution.

Question-12: What is the list of simple cost units?

Answer: the list of simple cost unit are as follows:

  • Passenger transport service- Per Kilometer
  • Goods transport service- Per Kilometer
  • Road maintenance- Per Kilometer of road maintenance
  • Canteen Service- Per meal
  • Hospital-Per bed
  • Private transport-Running hour, trip, kilometer.

Question-13: What is the list of composite cost units?

Answer: the list of composite cost unit are as follows:

  • Passenger Transport- Passenger Kilometer
  • Goods Transport-Ton Kilometer
  • Electricity Supply-Kilowatt Hour
  • Canteen Service-Man-meal
  • Hospital- Per Patient bed per day

Question-14: What are fixed transportation expenses?

Answer: Fixed transportation expenses are expenses that do not change with the movement of the vehicle and are the same for a fixed period of time. For example, Interest on capital, garage rent, insurance, and license fees, etc.

Question-15: What are variable transportation expenses?

Answer: Variable transportation expenses are those that are based on the movement of the vehicle. Repair and repairs, tires and tubes, gasoline, lubricants, and so on.

Question-16: What is a logbook or log sheet?

Answer: A logbook, also known as a log sheet, is a book or sheet that documents the operation and maintenance of cars, engines, pumping stations, and other equipment over a period of time.

Question-17: What elements are recorded in logbook or log sheet?

Answer: The elements recorded in the logbook or log sheet are as follows:

  • Number of trips
  • Driven kilometers
  • Transported passenger
  • Hours of delay
  • Reasons for being late etc.

Question-18: What is a performance Report?

Answer: The performance report is the report that is sent to the management authority for decision-making and cost control at the end of the specified period for each transport.

Question-19: How to calculate transport cost per unit?

Answer: Transport cost per unit= (Total cost during the period/Numbers of service units during the period)

Question-20: What is the objective of determining the cost per unit?

Answer: the objective of determining cost per unit is as follows:

  • It’s used to set the price of a ticket.
  • It’s used to keep track of costs.

Question-21: How to calculate run kilometers?

Answer: Run kilometers = (Number of vehicle*Distance*Number of trips*Working days)

Question-22: How to calculate passenger-kilometers?

Answer: Passenger kilometers= (Number of vehicle*Distance*Number of trips*Working days* Actual passenger carried)

Question-23: How to calculate Ton kilometers?

Answer: Ton Kilometers = (Number of vehicle*Distance*Number of trips*Working days* Goods carried)

Question-24: What is the main objective of cost centers in hospitals?

Answer:  The main objective of cost centers in hospital are determining the cost of medical services.

Question-25: What is the common cost unit for a hotel costing?

Answer: The common cost unit for hotel costing is “Per room day.”

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