1

INTRODUCTION

Operating costing is a method of costing applied by undertakings which

provide service rather than production of commodities. Like unit costing and
process costing, operating costing is thus a form of operation costing.
The emphasis under operating costing is on the ascertainment of cost of
rendering services rather than on the cost of manufacturing a product. It is
applied by transport companies, gas and water works, electricity supply
companies, canteens, hospitals, theatres, school etc. Within an organization
itself certain departments too are known as service departments which provide
ancillary services to the production departments. For example: maintenance
department; power house; boiler house; canteen; hospital; internal transport.
Operation costing offers better scope for control. It facilitates the
computation of unit operation cost at the end of each operation by dividing the
total operation cost by total input units. It is the category of the basic costing
method, applicable, where standardized goods or services result from a
sequence of repetitive and more or less continuous operations, or processes to
which costs are charged before being averaged over the units produced during
the period. The two costing methods included under this head are process
costing and service costing.

CIMA has defined

Operating Costing As that form of operation costing which applies when
standardized services are provided either y an undertaking or by a service cost
center within an undertaking.

Cost Accounting Standard 1 by ICWA defines Operating Cost

As the cost incurred in conducting a business activity. Operating costs refer to
the cost of undertakings, which do not manufacture any product but which
provide services.
Because of the varied nature of activities carried out by the service undertaking,
the cost system used is obviously different from that followed in manufacturing
concerns.

DEFINITION

The day-today expenses incurred in running a business, such as sales and

administration, as opposed to production .Also called operating expenses.
These are recurring expenses in operating the business. The expenses can
include property maintenance, taxes, and wages.

FEATURES OF OPERATING COSTING

The essential features of operating costs are as follows:

1 The operating costs can be classified under three categories. For example in
the case of transport undertaking these three categories are as follows:

OPERATING AND RUNNING CHARGES: It includes expenses of

variable nature. For example expenses on petrol, diesel, lubricating oil, and
grease etc.

MAINTENANCE CHARGES: These expenses are of semi-variable

nature and include the cost of tyres and tubes, repairs and maintenance, spares
and accessories, overhaul, etc.

FIXED OR STANDING CHARGES: These includes garage rent,

insurance, road license, depreciation, interest on capital, salary of operating
manager, etc.

2.

The cost unit used is a double unit like passenger-mile; Kilowatt-hour,

etc. It can be implemented in all firms of transport, airlines, bus-service, etc.,

and by all firms of Distribution Undertakings.

APPLICATION OF OPERATING COSTING

Transport
Service

APPLICATION
OF
OPERATING
COSTING

Welfare
Services

Supply
service

Explanation of above point is as follows:

1 TRANSPORT SERVICE: Under this method of costing, the operating cost of

each vehicle is determined. The common unit of service is tone kilometer in
case of goods transport, and passenger kilometer in case of passenger transport.
Examples of transport service are Truck operators, road transport, Railways,
Airlines, etc.

2 SUPPLY SERVICE: It includes services like electricity, steam, gas, water,

etc. where steam is used for the purpose of generating electricity, it is possible
to compute the cost of electricity generated by aggregating the steam
production costs with other related cost of electricity generation. A cost unit is
generally in terms of kilograms.

3 WELFARE SERVICES: It includes services like canteen, hospital, library,

etc. Hotels, restaurants employ operating costing. The total operation of a hotel
can be divided into number of cost centers like Restaurant, Housekeeping,
Laundry, etc. The cost unit is generally in terms of per meal/ dish.

COST UNIT:

For ascertaining costs, it is necessary to decide suitable cost units for each type
of service industry. Basically, Operating Costing is a type of Process Costing.
Thus it uses the methods of Process Costing when ascertaining the cost of
supply of electricity, steam etc. However, sometimes Operating Costing may
adopt a particular Job as a unit of costs as for example when costing a particular
trip by a bus so as to quote the charges. In such cases Operating Costing uses
the methods of Job Costing by treating a specific trip as a separate job. A cost
unit under operating costing may be of two types
a.

Simple cost unit; or

b.

Composite cost unit.

Following is the list of different cost units used in different types of service
enterprises

Service Industries

Simple Cost Unit

Passenger Transport

Per Kilometer

Goods Transport

Per Kilometer

Road Maintenance

Per K.M. of Road maintained

Water Supply

Per Kilo Liter of Water Supplied

Canteen

Per Meal / Dish

Service Industries

Composite Cost Unit

Passenger Transport

Per Passenger - K.M.

Goods Transport

Per Ton - K.M.

Electricity

Per Kilowatt Hour

Steam, Gas

Per K.G. / Cubic Ft.

Hospital

Per Patient Day

Library

Per Member Book

Thus, it can be seen that in Operating Costing, in most cases the cost unit is a
compound unit. It refers to both the Quantum of Service and Period of Service.
Thus a transporter charges for carrying so much weight (tons) for so much
distance (Km); an electricity company charges one for use of both the Quantum
(Kilowatt) and the Period (Hours); and so on.

Operating costing is nothing but the expenses which incurred to operate the
business, firm or an organization. Following are 3 main elements where the
operating cost is applied to know the operating income & expenses of the
organization.

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PROCEDURE:

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DETERMINE
COST UNIT

ABNORMAL
COST

PROCEDURE

ASCERTAIN
COST

NO STOCK

1. Determine cost unit: The first in operating costing is the determination of

the cost unit. This is a complex task.
2. Ascertain cost: The next point to be notes is that operating cost is period
cost. The cost of supplying the service for a period are ascertained in the
following manner(taking the example of a transport)
Vehicle no.: Each vehicle is treated as accost center and given a specific
number. All the cost account against this number. A separate account is
opened to record the cost and income of each vehicle.
Variable cost: Variable cost is the running and operating. This included
expenses of variable nature e.g. petrol, diesel, lubricating oil, grease etc. the
material requisition note and time sheet (or Log) bears the vehicle no. the

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relevant vehicle account is debited with it direct material and direct labour
cost. Direct expenses such as a fuel are debited to vehicle account on the
basic of log book and the cash / purchase / journal vouchers.

Fixed costs: Fixed cost (fixed charge) included garages rent, insurance, road
license fees etc. the fixed charges are apportioned and absorbed by each
vehicle no. on the basic of overhead absorption rate which may be actual or
pre determine. The fixed costs attributable to the vehicle are debited to the
relevant vehicle account.

Revenue: The revenue from the vehicle is credited to the vehicle account.
Profit or loss: the vehicle account at this stage will reveal the profit or loss
made on operating that vehicle. The profit or loss is then transfer to the
costing profit and loss account the total operating cost of a period is divided
by the number of cost unit (KM/Passenger/ Ton)supplied during the period
to arrive at the operating cost Per unit for that period.

1)

No stock: In case of a service industry there is no question of any closing

stock or work-in-progress since it is not possible to store a service for
future use.

2)

Abnormal cost: According to cost accounting standard 5 (transportation

cost) abnormal and non-recurring cost shall be directly debited to P&L

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a/c and shall not form part of operating cost. Examples are penalty,
detention charge demurrage and cost related to abnormal breakdown.

TRANSPORT COSTING:

Under this operating system cost of each vehicle is determined. The cost unit is
selected with proper care, keeping in view the needs of each concern, the
weight bulk & type of goods carried, the distance covered by each trip. The
common unit of service is tone kilometer, in case of goods transport &
passenger kilometer in case of passenger transport.

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Transport operating costs refer to costs that vary with vehicle usage, including
fuel, tires, maintenance, repairs, and mileage-dependent depreciation costs
(Booz Allen & Hamilton, 1999).

Vehicle miles traveled, traffic speed and delay, roadway surfaces, or roadway
geometry may affect travelers' vehicle operating costs, which should be
considered in a benefit-cost analysis.
Vehicle ownership costs refer to fixed costs that are not directly affected by
vehicle

mileage,

including

time-dependent

depreciation, insurance

registration fees, financing, and residential parking.

and

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It estimates..the followings:

Changes in total vehicle miles traveled along a corridor.

Changes in vehicle travel speeds and delay due to road and traffic
conditions.

Fuel consumption rates, fuel prices, and non-fuel-related operating costs.

Calculate total changes in vehicle operating costs.

For improvements to ride quality, such as pothole repairs and curve or

grade reductions, estimate effects on vehicle wear.

Changes in per capita vehicle ownership in an area.

Average vehicle ownership costs.

Calculate total changes in vehicle ownership costs.

OPERATING COST SHEET for (Month/Year)

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PARTICULARS

TOTAL (Rs.)

PER UNIT
(Rs.)

FIXED COST
Managers salary

XXX

Accountants salary

XXX

Drivers salary

XXX

Cleaners salary

XXX

Garage mechanic salary

XXX

Administrative expenses

XXX

Garage rent

XXX

Insurance premium

XXX

Road tax & permit fee

XXX

Depreciation on vehicles

XXX

Hire charges

XXX

Interest

XXX

TOTAL ( A)
RUNNING / VARIABLE EXPENSES

XXXX

XXX

Petrol / diesel expenses

XXX

XXX

Lubricating oil

XXX

XXX

Spare parts

XXX

XXX

Drivers / cleaners wages

XXX

XXX

Sundry expenses

XXX

XXX

XXXX

XXX

TOTAL ( B)
C

MAINTANANCE COST
Tyres & tubes

XX

Repairs

XX

TOTAL COST

TOTAL (C)
(A) + (B) + (C)

XX
XXXXX

XX
XXX

Simple Example:
1 From the following information calculate total kms and total passengers Kms

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No. of Buses=6
Days Operated in the month=25
Trips mage by each bus = 4
Distance of route 20 Kms (one way)
Capacity of Bus = 40 passengers
Normal passenger travelling 90% of capacity.

SOLUTION:
Total Kms covered = Run
Distance * Two ways * No. of trips * No. of days * No. of buses
20 Kms * 2 * 4 *25 * 6 = 24000 Kms
Total passenger-Kms. Covered = Run * Load
Load = Maximum capacity* Used capacity
= 40 * 90% = 36
Total Passenger Km Covered = 24000*3= 864000

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CASE STUDY
After understanding the meaning of operating costing at extent we move ahead
towards transport costing. We understood the meaning and procedure of
transport costing with the help of simple example, so now we will see that,
How transport costing is helpful for the business organizations.??
INTRODUCTION OF THE BUSINESS
Name of the transport company: SUNIL TRANSPORT
Owner of the company: SUBHASH DHONDIBA POL.
Year of incorporation: 1975
Type of vehicle: Truck
Locations for the transportation: Within Mumbai only
Type of goods which are carried out by company: Steel Rods, Coal, Iron box
Total trucks owned by the owner: 6

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CASE STUDY: SUBHASH TRANSPORTER

A transport Company has a fleet of 6 Trucks of 10 tonnes capacity each playing
in different directions for transport of customers goods. The Trucks run loaded
with good and return empty. The distance travelled, number of trips made and
the load carried per day by each truck are as under:
Series of Truck

One way distance

No. of trips per

Load carried per

No.

km.

day

trip / day (tonnes)

20

30

40

50

20

12

11

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

Total distance travelled

Maintenance cost

2013

603700

450000

2014

438000

360000

The following are the details of expenses for the year is as follows:
Diesel: Rs. 57 per liter. Each liter gives 5 km. per liter of diesel on an average.
Drivers salary: Rs. 13,000 p.m.
Licence & tax: 8000 p.a. per truck
Insurance: 30000 p.a. for all 6 trucks

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Purchase price per truck: Rs. 900000 life 10 years. Scrap value at the end of the
life is Rs. 20000
Oil & sundries: Rs. 150 per 100 km run
General overhead: Rs. 25000 p.a.
The vehicles operate 26 days per month on an average.
Requirement:
1. Prepare an annual cost statement covering the feet of 6 vehicles.
2. Calculation of cost per km. run
3. Determines the fright per tonne. Km. to yield a profit of 15% on freight.

Solution
Calculation of total tonne km. per annum
Tonne km. = one way distance * No. of trips * load per trip * No.of days per
month * No. of months
Statement showing the cost per tone kilometer of carrying Mineral from each
mine
AMOUNT (Rs.)
TRUCK 1

(30*4*7*26*12)

262080

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TRUCK 2

(40*2*6*26*12)

149760

TRUCK 3

(50* 2*6*26*12)

187200

TRUCK 4

(20* 3*8*26*12)

149760

TRUCK 5

(12*4*8*26*12)

119808

TRUCK 6

(11* 5*9*26*12)

154440

TOTAL Tonne km. per annum

1023048

Calculation of total distance covered

Run-km = Two way distance * No. of trips * No. of days per month * No. of
months

TRUCK 1

(60 * 4 *26 * 12)

74880

TRUCK 2

(80 * 2 *26 * 12)

51168

TRUCK 3

(100 * 2 * 26 * 12)

62400

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TRUCK 4

(40 * 3 * 26 *12)

37440

TRUCK 5

(24 * 4 * 26 *12)

29952

TRUCK 6

(22 * 5 *26 *12)

34320

TOTAL tonne km p.a.

290160

Calculation of variable & fixed components of maintenance cost

Variable cost per km. = changes in cost / changes in km.
= (450000 360000) / (603700 438000)
= Rs. 0.54 per km
Fixed Cost = Total cost (No. of km * variable cost per km)
= 450000 (603700 * 0.54) = Rs. 124002
Annual cost statement of six vehicles
Fixed cost:
Drivers salary
Licence and Taxes

(6 * 13000 * 12)

936000
8000

Insurance

30000

General overhead

25000

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Semi variable cost

Maintenance :
Variable

(290160 * 0.54)

Fixed

156686
124002

Variable cost
Diesel

(290160 * 57 / 5)

Oil & sundries

(290160 * 150 / 100)

Depreciation

(880000 * 10 / 6)
Total

3307824
435240
1466667
6489419

Annual cost
Cost per km. run = Total annual cost / Total run km.
= 6489419 / 290160 km. = Rs. 22.3649
Freight Rate per ton km
Total annual cost =
Add: 15% on fright i.e. (6489419 * 15%)

6489419.00
973412.85

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TOTAL FRIEGHT

7462831.85

Fright per ton km = 7462831.85 / 1023048 = Rs. 7.29

HOSPITAL COSTING:
A concern of most countries is health sector resources: the sources of finance
for health services, the ability to maintain past funding levels, resource
allocation patterns, and the efficiency of health services delivery.

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The hospitals of these countries are an important element of the concern about
health resources because they are the largest and most costly operational unit of
these health systems and account for a large portion of the health sectors
financial, human, and capital resources. In aggregate terms,

Hospitals utilize nearly half of the total national expenditure for the
health sector;

Hospitals commonly account for 50 to 80 percent of government

recurrent health sector expenditure:

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Hospitals use a large proportion of the most highly trained health

personnel.

A hospital is engaged in providing various types of medical services to the

patients.
Hospital costing is applied to decide the cost of these services. A hospital may
have following departments for providing various types of services:

1 Outdoor Patient Department. (O.P.D)

2.

Indoor Patient Department (Medical Wards).

3.

Medical Services Department:

X Ray Department,

Scanning Centre,

Pathology Laboratory,

Sonography Department.

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4.

General Services Departments:

Bolier House,

Power House,

Catering department,

Laundry Room,

Administrative Department,

5.

Miscellaneous Services Departments:

Transport Department,

Dispensary Department,

General Porting Department.

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UNIT OF COST:

The common units of costs of various departments in a hospital are as follows:

Department

Unit of Cost

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1. Outdoor Patient Department

Per out-patient

2. Indoor Patient Department

per Room-day

3. X Ray Department

Per 100 units

4. Scanning centre

per case

5. Pathology Laboratory

per 100 Requests

6. Laundry Department
7. Catering Department

Per 100 items laundered

Per Patient per week

The cost of hospital is divided into fixed and variable costs. Fixed costs include
staff salaries, depreciations of building, rent of building whereas variable cost
include light and power, water, laundry charges, food supplied to patients etc.

WHY HOSPITAL COSTS ARE IMPORTANT?

Hospital cost information is derived by relating the inputs of resources in
monetary terms to the outputs of services provided by the hospital. Cost
information is part of the basic information needed by managers and policy

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makers for making decisions about how to improve the performance of a

hospital, where to allocate the resources within or among hospitals, or to
compare the performance of different hospitals to one another. Some of the
Basic reasons for wanting cost information are to improve efficiency, increase
effectiveness, enhance sustainability, and improve quality.

How Does One Do A Hospital Costing Exercise?

The process of determining the costs of a hospital involves six steps:
1. Defining the major and relevant activity areas of the hospital.
2. Gathering information on the services provided or the output of the hospital.
3. Determining the labor and other recurrent costs.
4. Ascertaining the capital costs of the hospital.
5. Allocating indirect costs.
6. Reviewing and using the hospital cost summary.

HOSPITAL OPERATING COST SHEET FOR MONTH/YEAR

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Amt (Rs.) Amt (Rs.)

PARTICULARS
A. FIXED STANDING COSTS

Salaries to staff

xx

Premises Rent

xx

Repairs and maintenance

xx

General administration Expenses

xx

Cost of Oxygen, X-Ray, etc.

xx

Depreciation

xx

XX

RUNNING OR VARIABLE COSTS

xx

C.
D.

Doctors fees

Food

Medicines

Diagnostic Services

xx
xx
XX

xx
xx
XX

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E. Laundry

...

Hire charges for Extra Beds

XX

xx

XX

...

TOTAL OPERATING COST

NO. OF PATIENTS DAYS
COST PER PATIENT DAY (C)+(D)

Simple example:
Care Hospital operates a fitness center to provide counseling on nutrition,
exercise and health care for major surgery patients after their release from the
hospital. Average patient will make three visits to the center. Each visit lasts 40
minutes.

The hospital has estimated the following costs of operating the center:
Particulars
Occupancy costs per month

Amt
18000

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Clerical costs per month

12000

Other costs per month

4000

Medication charges per patient

44

Records charge per patient

16

Staffing cost per visit

Computer record update per visit

Hospital expects to have an average of 500 visits per month. What should be
the amount charged to each patient in order to cover the above costs?

Solution:

Particulars

Amt

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Indirect cost per month

Occupancy
Clerical
Other costs

A.

Indirect costs per visit ( 34000/500)

18000
12000
4000
3400

68

Staffing cost per visit

Computer record update per visit

3____

Total costs per visit

80

Visits per patient

3____

B Total cost per patient

240

Records charge per patient

16

Medication change per patient

44____

C Total average cost per patient

C.

Or per patient (60+80) per visit

300

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CASE STUDY
After the Transport costing now, we move ahead towards Hospital Costing. We
understood the meaning and procedure of hospital costing with the help of
simple example, so now we will see that, How transport costing is helpful for
the business organizations.??
INTRODUCTION OF THE HOSPITAL

Name of the Hospital: ARYAN HOSPITAL & ICU

Address: ROYAL GARDEN, KALA CHOWKI, MUMBAI - 400033,
NEXT TO GIRNAR TOWER

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Hours of operation: MONDAY, TUESDAY, WEDNESDAY, THURSDAY,

FRIDAY, SATURDAY, AND SUNDAY: 12:00 AM TO 11:59 PM
Type: Multispecialty
Date of Incorporation: 1 July 2006.

About Dr. Jyoti Vyas

Specialties
General Physician, Gastroenterology, Diabetology, Critical Care
Position
Consultant Diabetologist
Available at
Dr. Jyoti Vyas At "Aryan Hospital & ICU", kalachowki
Qualification
MBBS from Kasturba Hospital(BHEL)
DNB (S.P.Medical College,Bikaner)
ICU Incharge In Gurunanak Hospital
Sr Reg.in Medi Shushera Hospital
Jr.Consultant in Punamia Hospital
Expertise
Diabetic Care
Heart Disease
Fever
Pneumonia
Asthama
Malaria
Gastroenterology
Thyroid
Urinery Infection
Blood Pressure

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Aryan Hospital & ICU runs a Gynecology department in a hired building at a

rent of Rs. 70000 p.m. The hospital has undertaken to bear the cost of repairs
& maintenance.
The Gynecology department consists of 55 beds and 5 more beds can be
conveniently accommodated whenever required. The permanent staff attached
to the department is as follows:

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4 supervisors, each at a salary of Rs. 10000 p.m. 20 nurses each at a salary of

Rs. 20000 p.m. 8 Ward Boys, each at a salary of Rs. 6000 p.m.
Thought the department was open for the patient all the 365 days in a year but
it was found that only 250 days in a year, the department had a full capacity of
55 patients per day and for another 60 days it had on an average 35 beds only
occupied per day.
But there were occasions when the beds were full, extra beds were hired from
outside at a charge of Rs. 50 per bed per day.
This did not come to more than 10 beds extra above the normal capacity any
one day. The total hire charges for the extra beds incurred for the whole year
amounted to Rs. 125000
The department engaged expert doctors from outside to attend on the patients
and fees were paid on the basis of the number of patients attended and time
spent by them on an average worked out to Rs. 30000 p.m. in the year 2014.
The other expenses for the year were as under:
Repairs & maintenance (fixed)
Food supplied to patients (variable)
Janitor & other services for patients
(variable)
Laundry charges for their bed linen
(variable)
Medicines supplied (variable)
Cost of Oxygen,X-ray,etc.Other than
directly borne for treatment of
patients (fixed)
General administrative charges
allocated to the unit (fixed)

Rs. 10000
Rs.150000
Rs. 50000
Rs.75000
Rs. 175000
Rs. 240000

Rs. 108000

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Calculate the profit per patient per day made by the department in the year
2014 if the department recovered on overall amount of Rs. 500 per day on an
average from each patient.
The department wants to work on a budget for the year 2014, but the number
of patients requiring intensive care is very uncertain factor.
Assuming that same revenue & expenses prevail in 2014 in the first instance,
work out the number of patient days required by the department to break
even.
SOLUTION:
Calculation of No. of patient -days
55 beds * 250 days

= 13750

35 beds * 30 days

= 2100

Extra bed days (125000 / 50) = 2500

= 18350

Statement of cost
1

Income received (500 * 18350 patient

9175000

days)
2

Less :Variable costs (marginal costs) p.a.

Food

150000

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Janitor and other services

50000

Laundry charges

75000

Medicines supplied

175000

Doctors fees (30000 * 12)

360000

Hire charges for extra beds

125000

Contribution

785000
8240000

Less :Fixed Cost

Salaries :
Supervisors (4 * 10000 * 12)

480000

Nurses (20 * 20000 * 12)

4800000

Ward boys ( 8* 6000 * 12)

576000

Rent

(70000 * 12)

Repairs & maintenance

840000

10000

Cost Of Oxygen etc.

240000

General administration

108000

PROFIT

Profit per Patient day = Rs.1186000 / 18350 patient days

358000
1186000

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= 64.63
Break even point = (fixed cost / contribution * income)
= 7054000 / 8240000 * 9175000
= Rs. 78, 54, 424
Break even Point for Patient days = 78, 54. 424 / 500
= Rs. 15709 patient days.

HOTEL COSTING:

Hotel and lodges, providing daily accommodation facility to general public.

The Operating Costing is applied in lodging houses in order to find out the cost
of accommodation provided.
The convenient form measuring the accommodation facility is in terms of
Room day.
Cost per room day means the cost of maintaining one room in usable condition
for one day when occupied.
When different classes of rooms are provided, they can be expressed in term of
a single class with the help of weights based on appropriate width.

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While determining the cost per room day, factors such as room accommodation
available, whether cubicles or dormitories, number of persons lodging,
facilities provided to the lodgers, etc. are to be taken into account.
Most of the costs in the lodging houses are fixed in nature like depreciation,
staff salaries, maintenance, etc.
Hence, the distinctions between fixed and operating charges are rarely
observed. In case the customers are provided food and drinks along with
accommodation facility, a separate charge may be levied from them.
The cost per room day is arrived at by dividing the total cost with the number
of room day.
Some amount of profit is added to the cost per room per day to determine
charge per room day.
Once the charge per room day is determined, the same is to be multiplied with
the assigned weights to arrive at the rate to be charged for different classes of
room per day.

Hotels, restaurants employ operating costing. The total operation of a hotel is

divided into number of cost centers.
Restaurant-cost unit is number of meals served
Housekeeping-cost unit is no. of rooms cleaned

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Laundry-cost unit is number of clothes washed.

The important heads of expenditure is:

Provisions: Vegetables, fruits, meat. Flour, milk, oil, sugar
Labor: Salary of cooks, kitchen assistance, supervisors
Service: steam, gas, electricity, power and light
Consumable stores: crockery, glassware
Misc. overheads: Rent, rates, depreciation, insurance
Credit: Charges of meals. Tea and other sales.

COST SHEET FOR THE YEAR/MONTH

Step

Costs

Rs

Rs

45

Salaries to staff

XX

Room attendant wages

XX

Repairs and renovation

XX

Lighting and heating

XX

Power

XX

Linen

XX

Interior decoration
Sundries
Depreciation

XX
XX

XX
XX

XX

-Buildings
-Furniture & fixtures

XX

-Air-conditioners

XX

Premises rent

XX

Other Administration Expenses

XX

Interest on investment

XX

total operating cost (1)

XX

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no. of room days(2)

cost per room day (1+2)

CONCLUSION

XX

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Operating costs are expenses that relate to a buisness operations. It can also
refer to the costs of operating a specific device or branch of a corporation.
These costs usually fall into two categories, called fixed costs and variable
costs, and a business may have more of one type than the other.
Operating costs are not unique to any country, although actual expenses may
vary from one country to another or even from one location to another. Within
an industry, it is very possible for expenses to vary. It is, however, difficult to
find a business that does not have any of these costs. Even Internet businesses,
in which the costs of operations can often be reduced, it is almost impossible to
completely eliminate them.
Businesses have to keep track of both operating costs and costs associated with
non-operating activities, such as interest expenses on a loan. Both costs are
accounted for differently in a company's books, allowing analysts to see how
costs are associated with revenue-generating activities and whether or not the
business can be run more efficiently.

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BIBLIOGRAPHY
https://www.ziffi.com/hospitals-in-mumbai/aryan-hospitalicu-kalachowki

http://www.scribd.com/doc/51534751/PROJECT-ONOPERATING-COSTING

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Advanced Cost Accounting Sheth Publishers private Limited

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