Nature of Operating Costing

Nature of Operating Costing

The major purpose of operating costing is to calculate the cost of the services that are offered by the organization.

For doing this, it is essential to decide the unit of cost in such types of cases. The cost units change from industry to industry. For instances, cost per ton kilometre is to be determined while in case of passenger transport, in goods transport industry, cost per passenger kilometre is to be calculated.

The next step is to collect and identify several costs with in different headings. The headings that are used are as follow:

Ø   Fixed or standing charges

Ø   Semi-fixed or maintenance charges

Ø   Variable or running charges.

One of the significant features of operating costing is that mainly such costs are fixed in nature. For instance, in case of passenger transport organization, mainly the costs are fixed when few costs such as diesel and oil are variable and relies on the kilometres run

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