Operating costing is the cost procedure used for determining the cost per unit of service. operating costing is a method of cost accumulation designed to determine the cost of services. hence it is also called service costing. this method is used where the service is not completely standardized. operating costing is used in transport,hotels,hospitals,supply services and municipal services. these services may be used internally like canteen, delivery van,etc. Operating cost The operating costs are generally period costs. the expenses are accumulated for a period and they are related to the quantum of services rendered during the period. however in some cases operating costs can be terminal costs.eg-when a bus is chartered for a particular trip ,the cost of such a trip is calculated treating it as a specific job. Cost unit ENTERPRISE Railways or bus companies Hospital Canteen Water supply service Boiler house Goods transport Electricity boards Road maintainance Bricks Hotel COST PER UNIT Per passenger kilometer Per patient /day Per meals served Per 1000 kilograms Thousand kg of steam Per tonne km Per kilowatt-hours Per mile of road maintainance One thousand (per room/day)
Boiler house costing A boiler is used for generating steam which is used for power generation, air conditioning etc.the important items of cost relating to the boiler house costing are wages of foreman, proportionate salary of works engineer, furnace repairs, renewal of fire bars, fuel – includes coal furnace, water overheads etc.
Canteen costing Many undertakings provide subsidized meals to their workers at the canteens. for the purpose of cost collection, it may be considered a service by the company and the cost accumulation procedure is designed to suit it. the receipt of running a canteen includes subsidy received and sale of coupons. the canteen manager generally estimates the quantity of food required each day. company subsidy is deducted from the total cost incurred.
OPERATION COSTING Operation costing is the category of basic costing methods applicable where standardized goods or services result from a sequence of repetitive and more or less continuous operation or process to which costs are charged before being averaged over units produced during the period. this is suitable for industries where manufacture is continuous and units are identical. this method is applied in industries such as mines,quarries,oil drilling,breweries,cement works, brick works etc. For example- a barrel of beer in breweries, a tonne of coal in collieries, one thousand bricks in brickworks etc.the object of this method is to ascertain the cost per unit of output and the cost of each item of such cost. here cost accounts take the form of cost sheets prepared for a definite period. the cost per unit is determined by dividing the total expenditure incurred during a given period by a number of units produced during that period.