Operating cost

1.​ A manufacturing firm facing shortage of electric power supply from the state
electricity board has set up its own power generation plant for efficient running of
its production units in the factory. The following information has been taken from
the records in connection with the generation of power for a month:

i.​ Number of units generated was 10,00,000 for the month of which 10% was
utilized by the generator department.
ii.​ Consumption date of materials, etc., for the month:
Coal consumed ​ ​ ​ ​ 300 MTs at Rs. 3,600 per MT
Oil consumed ​ ​ ​ ​ 4.5 MTs at Rs. 40,000 per MT
Cost of water extraction and treatment​ for 6 lakh litres at Rs.1.25 per litre
iii.​ Steam boiler costs Rs.20lakhs with a residual value of Rs.2 lakhs after a life
of 10 years.
iv.​ Salaries and wages per month:
a)​ For staff of generating plant:
100 skilled workers at Rs.3,000 p.m
150 helpers at Rs.1,500 p.m.
b)​ For staff of boiler house:
60​ category A workers at Rs.1,500 p.m
100 category B workers at Rs.1,000 p.m
v.​ Cost of generating plant Rs.36 lakhs with no residual value. Depreciation at
10% on straight line basis is to be charged.
vi.​ Repairs and maintenance of generating plant and boiler Rs.50,000 p.m.
vii.​ Share of administrative charges Rs.0,4000 p. m.
viii.​ Sales value of ash disposed of Rs.15,000 p.m.

Calculate the per unit cost of electricity generated using a cost sheet format.(jain
-17.19)
2.​
A hotel has three types of rooms viz., A,B,C. you are to suggest what rent should be
charged for each type of rooms on the basis of the following information:
I.​ The rent of B type rooms is to be fixed as 1.5 tims of the C type rooms and
that of A type rooms as twice of the C type rooms.
 II.​ There are 20 A type rooms, 30 B type rooms and 100 C type rooms in the
hotel.
III.​ Normally 60% of A type rooms, 80% of B type rooms and 90% of C type
rooms are occupied in summer; and I winter 20% of A type rooms, 20% of
B type rooms and 50% of C type rooms are occupied.
IV.​ Actual expenses are as follows:
a)​ Staff salary : Rs.2,20,000 p.a.
b)​ Room attendants’ salary (when occupied)

Room type Summer Winter

A Rs.4.00 per day Rs.6.00 per day

c)​ Lighting per month if occupied for full month for both summer and
winter:
A type romm : Rs.80.00; Brype room : Rs.60.00; and C type room:
Rs.40.00
d)​ Power per month if occupied for full month for both summer and winter:
A type room Rs.40.00; B type room : Rs.30.00; and C type room :
Rs.20.00.
e)​ Repairs and maintenance : Rs.42,000 p.a.
f)​ Decoration ; Rs.50,000 p.a.
g)​ Sundry expenses : 76,550 p.a.
h)​ Depreciation on:
-​ Building at 5%; cost of building is Rs.14 lakhs.
-​ Furniture at 10%; cost of furniture is Rs.3 lakhs.
i)​ Summer may be assumed for 7 months and winter for 5 months in a
year. Normal days in a month by be taken as 30.
j)​ Profit on cost is 25%? (jain – I/17.23)

3.​ A transport company has a fleet of three trucks of 10 tonnes capacity each plying in
different directions for transport of customers’ goods. The truck run loaded with
 goods and return empty. The distance travelled, number of trips made and the load
carried per day by each truck are as under:

Truck no. One way distance No. of trips per Load carried per
KM. day trip/day tonnes

1 16 4 6
2 40 2 9
3 30 3 8

The analysis of maintenance cost and the total distance travelled during the last two
years is as under:

Year Total distance travelled Maintenance cost

1 1,60,200 46,050
2 1,56,700 45,175

Following are the details of expenses for the year under review:
Diesel​ Rs.10 per litre. Each litre gives 4 km. per litre of diesel
on an average
Drivers’ salary​ Rs.2,000 per month
License and taxes​ Rs.5,000 p.a per truck
Insurance ​ Rs.5000 p.a for all the three vehicles.
Purchase price per truck​ Rs.3,00,000. Life 10 years. Scrap value at the end of life
is Rs.10,000
Oil and sundries​ Rs.25 per 100 km run.
General overhead​ Rs,11,084 p.a
The vehicle operate 24 days per month on an average.
Required:
a)​ Prepare an annual cost statement covering the fleet of three vehicles.
b)​ Calculate the cost per [Link]
c)​ Determine the freight rate per tonne km. to yield a profit of 10% on freight.(Jain
I/17.31)
4.​ Transport Company has been given a 40 km long route to run 5 buses the cost of each bus
is 6,50,000. The buses will make three round trips per day carrying on an average 80%
passenger of their seating capacity. The seating capacity of each bus is 50 passengers. The
buses will run on average 25 days in a month the other information for the year are given
below
Garage rent​ ​ ​ ​ Rs.4000 per month
Annual repair and maintenance ​ ​ Rs.22,500 per bus
Salary of 5 drivers​​ ​ ​ Rs.3000 each per month
Wages of 5 conductors​ ​ ​ Rs.1,200 each per month
Managers salary​ ​ ​ ​ Rs.7,500 per month
Road tax ​ ​ ​ ​ ​ Rs.5,000 per quarter
Office expenses ​ ​ ​ ​ Rs.2,000 per month
Cost of diesel per litre ​ ​ ​ Rs.33
Km Run per litre for each bus ​ ​ 6 km
Annual depreciation ​ ​ ​ 15% of cost
Annual insurance ​​ ​ ​ 3% of cost
Calculate the bus fare to be charged from each passenger per kilometre if the company
wants to earn a profit of 331/3% on taking. (MN Arora 11.15)
5.​
Following are the information given by an owner of hotel. You are require to advise him what
rent should be charged from the customers per day so that he is able to earn 25% on cost
other than interest.
a)​ Staff salaries ​ ​ Rs.80,000 p.a.
b)​ Room attendant’s salary Rs.2 per day. The salary is paid on daily basis and services of
room attendant are needed only when the room is occupied. There is one room
attendant for one room.
c)​ Lighting, heating and power: the normal lighting expenses for a room if it is occupied
for the whole month is Rs.50 per room. Power is used only in winter and normal
charge per month if occupied for a room is Rs.20.
d)​ Repairs to buildings Rs.10,000 p.a.
e)​ Linen etc. Rs.4,800 p.a.
f)​ Sundries Rs.6,600 p.a.
g)​ Interior decoration and furnishing Rs.10,000 p.a.
 h)​ Cost of building Rs.4,00,000: rate of depreciation 10%
i)​ Other equipments Rs.1,00,000: rate of depreciation 10%
j)​ Interest at 5% may be charged on its investments of Rs.5,00,000 in building and
equipments.
k)​ There are 100 rooms in the hotel and 80% of the rooms are normally occupied in
summer and 30% of the rooms are busy in winter.
l)​ You may assume that period of summer and winter is six months each. Normal days
in a month may be assumed to be 30.
Prepare a operating cost statement (Pillai – 560)

6.​ [Link] singh has started transport business with a fleet of 10 taxies. The various
expenses incurred by him are given below:
a)​ Cost of each taxi Rs.75,000
b)​ Salary of office staff Rs.1,500 p.m
c)​ Salary of garage staff Rs.2,000 p.m
d)​ Rent of garage Rs.1,000 p.m
e)​ Driver’s salary (per taxi) Rs.400 p.m.
f)​ Road tax and repairs per taxi Rs.2,160 p.a.
g)​ Insurance premium at 4% of cost p.a
The life of a taxi 3,00,000 k.m and at the end of which it is estimated to be sold at
Rs.15,000. A taxi runs on an average 4,000 km. per month of which 20% it runs
empty. Petrol consumption is 9 km. per litre of petrol costing Rs.6.3 per litre. Oil and
other sundry expenses amount to Rs.10 per 100 km.
Calculate the effective cost of running taxi per kilometre. If the hire charge is Rs.1.8
per km. find out the profit [Link] singh may expect to make in the first year of
operation.(Pillai -552)
7.​ Transport companies running a fleet of 6 buses between two towns 75 km apart. Seating
capacity of each bus is 40 passengers. The following particulars are available for the
month of June:
Wages of a diver, conductors and cleaners​ ​ Rs.3,600
Salaries of office and supervisory staff ​ ​ ​ Rs.1,500
Diesel And other oils ​ ​ ​ ​ ​ Rs.10,320
repairs and maintenance​ ​ ​ ​ ​ Rs.1,200
 Taxation insurance etc​ ​ ​ ​ ​ Rs.2,400
Depreciation ​ ​ ​ ​ ​ ​ Rs.3,900
Interest on capital ​ ​ ​ ​ ​ Rs.3,000
Actual passengers carried were 80% of the seating capacity all the buses ran on all the
days of the month. Is bus made one round trip per day. Find out the cost per passenger
kilometre(MN Arora 11.1)
8.​ KSD cements Ltd. has a captive power generation plant for its cement works. The
following information is available regarding power generation for the month of
April,2016.
Coal consumption​​ ​ ​ 180 tons at Rs.400 per ton
Oil​​ ​ ​ ​ ​ 300 liters at Rs. 8 per litre
Water ​ ​ ​ ​ ​ 1,500 gallons at Rs.200 per gallon
Stores and other consumables​ ​ Rs.2,000​
Salaries of generating plant-I​ ​ supervisor at Rs.3,000 p.m; 4 skilled workers at
​ ​ ​ ​ ​ ​ Rs.2,000 p.m. 3 helpers at Rs.1,200 p.m
Salaries of boiler house attendants​ 6 workers at RS.1,500 p.m.
Cost of generating plant​ ​ Rs.5,00,000 having life of the plant is 10 years
​ ​ With a residual value of RS.50,000
Cost of steam boiler​ Rs.1,50,000 having a life of 10 years with no
​ ​ Residual value
Misc. income received by sale of ash​ Rs.2,000
Repairs and maintenance​ ​ ​ generating plat RS.2,500; boiler house RS.1,500
Share of administrative overhead​​ Rs.4,000
1/10thof the units generated were used by the generating plant itself.
No of units generated during the month 4,00,000.
You are required to
Prepare the operating cost sheet
Calculate cost of power used in power generation(RAVI -416)
Calculate the cost per unit of power generated.