Question

Name an industry/company that uses operating costing.

Hint:

When answering service costing questions, always identify the specific service unit used to measure performance, such as Passenger-Kilometer for transport or Room-Day for hotels.

Answer 1

Step 1: Defining Operating Costing:
Operating Costing (also known as Service Costing) is a specialized costing method used by organizations that provide intangible services rather than manufacturing physical goods.

Step 2: Identifying Suitable Service Sectors:
Operating costing is standard in service-based industries, such as:
• Transport Services: Passenger buses, commercial railways, airlines.
• Utility Providers: Power generation plants, water utilities.
• Hospitality & Healthcare: Hotels, nursing homes, hospitals.
• Welfare Services: Educational institutions, public libraries.

Step 3: Naming a Specific Industry or Company:
The Passenger Transport Industry (for example, a public transit company like the State Road Transport Corporation or a commercial airline like Air India) is a prime user of operating costing. It uses this method to track operational expenses (like fuel, driver wages, vehicle depreciation, and insurance) and calculate key metrics like the cost per passenger-kilometer.