Question

Operating costing is concerned with ascertainment of operating cost for rendering unit of _______

Hint:

Operating costing tracks costs by service units, which are usually composite units that combine volume and time (such as Passenger-Kilometers).

Answer 1

Step 1: Identifying the Purpose of Operating Costing:
Unlike manufacturing firms that track the cost of physical goods, service-oriented businesses must track the cost of the activities they perform.

Step 2: Defining the Cost Object:
The primary goal of operating costing is to calculate the total cost of delivering services. Therefore, the costing framework is designed around a unit of services.

Step 3: Illustrating the Service Cost Unit:
The service units used for tracking are tailored to the specific industry:
• Transport: Cost per passenger-kilometer or ton-kilometer.
• Hospitals: Cost per bed-day occupied.
• Electricity Utility: Cost per kilowatt-hour (kWh). Thus, the blank is correctly filled with the word services.