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
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
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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Accounting Equation |
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Journal Entries in Nepali |
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Journal Entries |
|
Journal Entry and Ledger |
|
Ledger |
|
Subsidiary Book |
|
Cashbook |
|
Trial Balance and Adjusted Trial Balance |
|
Bank Reconciliation Statement (BRS) |
|
Depreciation |
|
|
|
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Financial Accounting and Analysis (All videos) |
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Accounting Process |
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Accounting for Long Lived Assets |
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Analysis of Financial Statement |
######
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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