A LMV Pvt. Ltd, operates cab/ car rental service in Delhi/NCR. It provides its service to the offices of Noida, Gurugram and Faridabad. At present…

CA Intermediate · Cost and Management Accounting · RTP · May 2024
A LMV Pvt. Ltd, operates cab/ car rental service in Delhi/NCR. It provides its service to the offices of Noida, Gurugram and Faridabad. At present it operates CNG fuelled cars but it is also considering to upgrade these into Electric vehicle (EV). The following details related with the owning of CNG & EV propelled cars are as tabulated below: Particulars CNG Car EV Car Car purchase price (₹) 9,20,000 15,20,000 Govt. subsidy on purchase of car (₹) 1,50,000 Life of the car 15 years 10 years Residual value (₹) 95,000 1,70,000 Mileage 20 km/kg 240 km per charge Electricity consumption per full charge 30 Kwh CNG cost per Kg (₹) 60 Power cost per Kwh (₹) 7.60 Annual Maintenance cost (₹) 8,000 5,200 Annual insurance cost (₹) 7,600 14,600 Tyre replacement cost in every 5-year (₹) 16,000 16,000 Battery replacement cost in every 8-year (₹) 12,000 5,40,000 Apart from the above, the following are the additional information: Particulars Average distance covered by a car in a month 1,500 km Driver's salary (₹) 20,000 p.m Garage rent per car (₹) 4,500 p.m Share of Office & Administration cost per car (₹) 1,500 p.m You have been approached by the management of A LMV Pvt. Ltd. for consultation on the two options of operating the cab service. CALCULATE the operating cost of vehicle per month per car for both CNG & EV options.

Suggested Answer and Working Notes:

Workings: 1. Calculation of Depreciation per month: Particulars CNG Car EV Car A Car purchase price (₹) 9,20,000 15,20,000 B Less: Govt. subsidy (₹) -- (1,50,000) C Less: Residual value (₹) (95,000) (1,70,000) D Depreciable value of car (₹) [A-B-C] 8,25,000 12,00,000 E Life of the car 15 years 10 years F Annual depreciation (₹) [D÷E] 55,000 1,20,000 G Depreciation per month (₹) [F÷12] 4,583.33 10,000 2. Fuel/ Electricity consumption cost per month: Particulars CNG Car EV Car A Average distance covered in a month (KM) 1,500 1,500 B Mileage (KM) 20 240 C Qty. of CNG/ Full charge required [A÷B] 75 kg. 6.25 D Electricity Consumption [C×30kwh] -- 187.5 E Cost of CNG per kg (₹) 60 -- F Power cost per Kwh (₹) -- 7.60 G CNG Cost per month (₹) [C×E] 4,500 -- H Power cost per month (₹) [D×F] -- 1,425 3. Amortised cost of Tyre replacement: Particulars CNG Car EV Car A Life of vehicle 15 years 10 years B Replacement interval 5 years 5 years C No. of time replacement required 2 times 1 time D Cost of tyres for each replacement (₹) 16,000 16,000 E Total replacement cost (₹) [C×D] 32,000 16,000 F Amortised cost per year (₹) [E÷A] 2,133.33 1,600 E Cost per month (₹) [F÷12] 177.78 133.33 4. Amortised cost of Battery replacement: Particulars CNG Car EV Car A Life of vehicle 15 years 10 years B Replacement interval 8 years 8 years C No. of time replacement required 1 time 1 time D Cost of battery for each replacement (₹) 12,000 5,40,000 E Total replacement cost (₹) [C×D] 12,000 5,40,000 F Amortised cost per year (₹) [E÷A] 800 54,000 E Cost per month (₹) [F÷12] 66.67 4,500 Calculation of Operating cost per month Particulars CNG Car EV Car (₹) A Running cost: Fuel cost/ Power consumption cost [Refer WN-2] 4,500 1,425 B Maintenance cost: Annual Maintenance cost [Annual cost ÷12] 666.67 433.33 Annual Insurance cost [Annual cost ÷12] 633.33 1,216.67 Amortised cost of Tyre replacement [Refer WN-3] 177.78 133.33 Amortised cost of Battery replacement [Refer WN-4] 66.67 4,500 1,544.45 6,283.33 C Fixed cost: Depreciation [Refer WN-1] 4,583.33 10,000 Driver's salary 20,000 20,000 Garage rent 4,500 4,500 Share of Office & Administration cost 1,500 1,500 30,583.33 36,000 D Operating cost per month [A+B+C] 36,627.78 43,708.33

Topics: Service Costing

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