Canteen Service | Service Costing | Problems & Solutions

 

 

Concept of Service Costing

There are two types of business firms; goods selling firms or service providing or rendered firms.

Service costing is a type of operation costing which is used in service providing organizations.

In this service cost accounting, all the costs incurred in the production of a service are added together.

These costs are fixed costs, semi-variable costs and variable costs.

The sum of these costs is known as total cost.

The total cost is divided by the total units to find out per unit cost..

 

Service costing is followed by the service industries.

Generally there are two types of services.

They are internal services and external services.

 

Internal services

Services provided by sections and departments to the production department are called internal service.

 

External services

Services provided to public utility are called external service; they are:

Transport services

Supply services

Welfare services

Municipal services

 

 

Accounting for Canteen Service | Accounting for Canteen Costing

Canteen service is also called restaurant service.

Many of undertaking provide cheap canteen facilities to its staff; such as: public limited company, school, college, non-government organization (NGO), international non-government organization (INGO) etc.

Food and liquor items are provided on subsidized cost.

 

To get foods, coupons are needed.

Coupon is supplied on pre-payment of cost of foods. Fixed menu is available in canteen.

It provides some selected food and beverage items.

The expenses related to canteen are categorized in different headings.

Classifications of expenses used in a canteen or restaurant business are:

Provisions/commodities

Manpower/wages and salaries

Consumable store

Services

Miscellaneous

 

 

 

 

 

Operating Cost Sheet of Canteen Service

For one year

Particulars	Last Month/Year	Current Month/Year
A.  Provisions or commodities:
Tea (leaf)	xxxx	xxxx
Sugar	xxxx	xxxx
Milk	xxxx	xxxx
Vegetable	xxxx	xxxx
Spices	xxxx	xxxx
Biscuits, bread and cake	xxxx	xxxx
Meat, fish, eggs	xxxx	xxxx
Soft drink, coffee etc	xxxx	xxxx
Total A	xxxx	xxxx
B.  Manpower or wages and salaries:	xxxx	xxxx
Salary to supervisor	xxxx	xxxx
Salary to cook	xxxx	xxxx
Salary to waiters	xxxx	xxxx
Salary to kitchen assistant	xxxx	xxxx
Salary to counter boy/girls	xxxx	xxxx
Salary canteen manager etc	xxxx	xxxx
Total B	xxxx	xxxx
C. Consumable store:	xxxx	xxxx
Table linen	xxxx	xxxx
Cutlery	xxxx	xxxx
Crockery and glassware	xxxx	xxxx
Cleaning materials	xxxx	xxxx
Dustbin etc	xxxx	xxxx
Total C	xxxx	xxxx
D. Services:	xxxx	xxxx
Fuel, gas and coal	xxxx	xxxx
Power and electricity	xxxx	xxxx
Steam	xxxx	xxxx
Water etc	xxxx	xxxx
Total D	xxxx	xxxx
E. Miscellaneous:	xxxx	xxxx
Depreciation on utensils and furniture	xxxx	xxxx
Rent and rate	xxxx	xxxx
Repairs and maintenance	xxxx	xxxx
Insurance	xxxx	xxxx
Overhead etc	xxxx	xxxx
Total E	xxxx	xxxx
Total operating cost                 (A+B+C+D+E)	xxxx	xxxx
Sales revenue xxxx coupons @ $xx	xxxx	xxxx
Subsidy received	xxxx	xxxx

 

Profit on cost = Total cost x % ÷ 100

Profit on revenue = Total cost x % ÷ (100 – %)

 

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3A

Sriram Pistons Company Ltd, a leading ring and piston of automobile manufacture company provides its employees canteen facility as subsidy rate.  The following information is related for the month of March:

Purchases during the month:

Commodity	Quantity	Rate per unit
Tea	10 kg.	$400/kg
Sugar	700 kg.	$65/kg
Milk	525 liters	$60/liter
Vegetables	–	$40,000
Spices	–	$10,000
Eggs	–	$30,000
Cold drinks	900 bottles	$30/units

 

Other expenses for the year:

Supervisor’s salary	$12,000 per month	Power and electricity	$4,000 per month
Cook’s salary	$8,000 per month	Fuel, gas and coal	$4,500 per month
4 waiter’s salary	$6,000 per month each	Rent	$48,000 per year
6 assistants	$5,000 per month each	Repairs and maintenance	$1,000 per month
Linen and cutlery average	$2,500 per month	Insurance	$12,000 per year
Glassware	$3,000 per month	Depreciation of utensils and furniture	$24,000 per year
Cleaning materials	$2,000 per month

Sale of coupons during the month was 12,500. Average breakfast and lunch at subsidy rate is $20 per coupon.

Required:

Operating cost statement of the canteen showing subsidy paid by the company.

 [Answer: Total cost $273,000; Subsidy $23,000]

SOLUTION

Operating Cost Sheet

For one month

Description	Amount $
A. Provisions/ Commodities:
Tea                        (10 kg @ $400)	4,000
Sugar                   (200 kg@ $65)	13,000
Milk                      (525 Liter @ $60)	31,500
Vegetable	40,000
Spices	10,000
Eggs	30,000
Meat, fish, eggs	Nil
Cold drink           (900 bottles @ $30)	27,000
Total A	155,000
B. Manpower/ Wages and Salaries:
Salary to supervisor	12,000
Salary to cook	8,000
Salary to waiters                 (4 x $6,000)	24,000
Salary to kitchen assistant	Nil
Salary to assistants           (6 x $5,000)	30,000
Salary canteen manager	20,000
Total B	94,000
C. Consumable Store:
Linen and cutlery average	2,500
Crockery and glassware	3,000
Cleaning materials	2,000
Dustbin	Nil
Total C	7,500
D. Services:
Fuel, gas and	4,500
Power and electricity	4,000
Steam	Nil
Water	Nil
Total D	8,500
E. Miscellaneous:
Rent and rate           ($48,000 ÷ 12)	4,000
Repairs and maintenance	1,000
Insurance                  ($12,000 ÷ 12)	1,000
Depreciation of utensils and furniture ($24,000 ÷ 12)	2,000
Total E	8,000
Total operating cost                                                         (A+B+C+D+E)	$273,000
Sales revenue 12,500 coupons @ $20	$250,000
Subsidy Received	$23,000

 

 

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Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3B

XYZ College provides subsidized canteen facilities to its students. Due to price hike in in July 2021, the cost of materials increased. The following information is available:

Particulars	June 2021	July 2021
Number of students	2,000	2,200
Sales realized through coupons [$]	10,00,000	12,00,000
Materials consumed [$]	6,00,000	8,00,000
Labour and supervision [$]	5,00,000	5,50,000
Other expenses [$]	3,00,000	4,00,000

Required: (a) Subsidy given by college; (b) Subsidy per student; (c) Cost increase per student; (d) Cost increase in percent

[Answer: (a) $400,000 and $550,000;

(b) $200 and $250; (c) $50; (d) 25%]

SOLUTION:

Comparative Cost Sheet of Canteen

XYZ College

Particulars	June 2021	July 2021
Materials consumed	6,00,000	8,00,000
Labour and supervision	5,00,000	5,50,000
Other expenses	3,00,000	4,00,000
Total cost	14,00,000	17,50,000
Less: Sales by coupons	10,00,000	12,00,000
Subsidy given by college	$4,00,000	$5,50,000
No. of students	2,000	2,200
Subsidy per student (monthly)	$200	$250

 

Again,

Subsidy increases   = 250 – 200                                     = $50

Increase in %           = ($50 ÷ $200) x 100        = 25%

 

 

 

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Problems  and  Answers  of  Canteen  Costing

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3A        

A campus runs a canteen for the benefit of students at subsidy of 25% on cost. Other data:

Costs	Current  month	Previous month
Provision:
Vegetables	25,000	20,000
Milk	15,000	12,000
Other	10,000	10,000
Manpower:
Cooks	3,000	3,000
Helpers	2,000	2,000
Others	2,000	2,000
Maintenance:
Gas	6,000	4,000
Rent	1,000	1,000
Consumable stores	1,200	1,000
Sales through coupons	68,000	60,000

Prepared canteen cost sheet of two months showing necessary details including:

(a) Total operating cost; (b) Subsidy amount; (c) Net cost; (d) Profit or loss for the given two months

[Answer: (a) Total cost = $65,200; $55,000; (b) Subsidy = $16,300; $13,750;

(c) Net cost = $48,900; $41,250; (d) Profit = $16,100; $18,750]

 

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

PROBLEM: 3B 

Duggar Group provides subsidized canteen facility to its employees. Following details is available for the month of May:

Purchase for the month:
Chicken	$14,000
Eggs	$4,800
Vegetables average	$5,000 per month
Rice	100 kg @ $60 per kg
Spices average	$2,000 per month
Sundry commodities	$3,640 per month
Wages and salaries:
2 cook	$10,000 per month each
1 counter clerk	$6,000 per month
2 helpers	$5,000 per month each
Consumable Store:
Linen and cutlery average	$18,000 per year
Crockery and glassware	$24,000 per year
Cleaning and dustbin materials	$500 per month
Services:
Gas and fuel	$2,700 per month
Electricity	$800 per month
Miscellaneous:
Rent	$60,000 per year
Repairs and depreciation	$1,000 per month

Subsidy allocated by group 30% of total cost. Number of meal for the month is 2,500.

Required: (1) Total operating cost and net cost; (2) Coupon price per meal if profit is 25% on net cost

[Answer: Total cost = $84,940; Net cost = $59,458;

Coupon price per meal = $29.73; Profit per meal = $5.95;

 

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