BPS is a public school that operates a comprehensive transportation system with 25 buses, each serving different routes to transport students to and…

CA Intermediate · Cost and Management Accounting · MTP · September 2025
BPS is a public school that operates a comprehensive transportation system with 25 buses, each serving different routes to transport students to and from school. Given the large student population requiring bus services, the school has implemented a dual-shift system where each bus operates twice daily during both morning and afternoon sessions. The morning schedule is strategically designed with the first trip collecting senior students, followed by a second trip one hour later for junior students, while the afternoon reverses this pattern with junior students departing first and senior students following an hour later. Each bus travels a one-way distance of 8 kilometers per route, and all vehicles are housed in the school's on-site garage facility. The school works 22 days per month and observes vacation closures during May and June, yet the bus fee structure requires students to pay for all 12 months of the year regardless of the vacation periods. The details of expenses for a year are as under: Driver's salary – payable for all the 12 in months - 12,000 per month per driverCleaner's salary payable for all the 12 months - 8,000 per month per cleanerLicense fees, taxes etc.8,400 per bus per annumInsurance Premium - 15,600 per bus per annumRepairs and Maintenance - 20,500 per bus per annumPurchase price of the bus - 20,00,000 eachLife of the bus 16 yearsScrap value - 1,60,000Diesel Cost - 84.50 per litre Each bus gives an average of 5 km. per litre of diesel. The seating capacity of each bus is 40 students. The school follows differential transportation fees based on distance travelled as under: Students picked up and dropped within the range of distance from the school Transportation fee Percentage of students availing this facility 2 km. 25% of Full 15% 4 km. 50% of Full 30% 8 km. Full 55% Due to excess pollution, the school remained closed from December 2024 to January 2025. Drivers and cleaners were paid 75% of their salary during these period. Repairing cost reduced to 90% for the year 2024. Ignore the interest cost. Required: (i) PREPARE a statement showing the expenses of operating a single bus and the fleet of 25 buses for a year. (ii) FIND OUT transportation fee per student per month in respect of: (a) Students coming from a distance of upto 2 km. from the school. (b) Students coming from a distance of upto 4 km. from the school; and (c) Students coming from a distance of upto 8 km. from the school. (iii) CALCULATE the minimum bus fare that has to be recovered from the students for the year 2025.

Suggested Answer and Working Notes:

(a) (i) Statement showing the expenses of operating a single bus and the fleet of 25 buses for a year Particulars Per bus per annum (₹) Fleet of 25 buses per annum (₹) Running costs: (A) Diesel (Refer to working note 1) 2,37,952 59,48,800 Repairs & maintenance costs: (B) 20,500 5,12,500 Fixed charges: Driver's salary (₹ 12,000 × 12 months) 1,44,000 36,00,000 Cleaners salary (₹ 8,000 × 12 months) 96,000 24,00,000 Licence fee, taxes etc. 8,400 2,10,000 Insurance 15,600 3,90,000 Depreciation 20,00,000 -1,60,000 1,15,000 28,75,000 16 years Total fixed charges: (C) 3,79,000 94,75,000 Total expenses: (A+B+C) 6,37,452 1,59,36,300 (ii) Average cost per student per month in respect of students coming from a distance of: (a) 2 km. from the school {6,37,452 / (236 students × 12 months)} (Refer to Working Note 2) = 225.09 (b) 4 km. from the school (₹ 225.09 × 2) = 450.18 (c) 8 km. from the school (₹ 225.09 × 4) = 900.36 (iii) Calculation of minimum bus fare to be recovered from the students during the year 2025: Statement showing the expenses of operating a single bus in year 2025 Particulars Per bus per annum (₹) Running costs: (A) Diesel (Refer to working note 3) 1,90,362 Repairs & maintenance costs: (B) (₹ 20,500 x 0.90) 18,450 Fixed charges: Driver's salary {12,000 × 10 months + (75% of 12,000 × 2 months)} 1,38,000 Cleaners' salary {8,000 × 10 months + (75% of 8,000 × 2 months)} 92,000 Licence fee, taxes etc. 8,400 Insurance 15,600 Depreciation 20,00,000 -1,60,000 1,15,000 16 years Total fixed charges: (C) 3,69,000 Total expenses: (A+B+C) 5,77,812 Minimum bus fare to be recovered: (a) 2 km. from the school {5,77,812 / (236 students × 12 months)} (Refer to Working Note 2) = 204.03 (b) 4 km. from the school (₹ 204.03 × 2) = 408.06 (c) 8 km. from the school (₹ 204.03 × 4) = 816.12 Working Notes: 1. Calculation of diesel cost per bus Distance travelled per year (8 km x 2 trips x 4 shifts x 22 days x 10 months) 14,080 km. No. of litres of diesel required per bus per year (14,080 km. ÷ 5 km.) 2,816 litres Cost of diesel per bus per year (2,816 litres × ₹ 84.50) 2,37,952 2. Calculation of equivalent number of students per bus Bus capacity of 2 trips (40 students × 2 trips) 80 students 1/4th fare students (15% × 80 students) 12 students 1/2 fare students (30% × 80 students × 2) (equivalent to 1/4th fare students) 48 students Full fare students (55% × 80 students × 4) (equivalent to 1/4th fare students) 176 students Total students equivalent to 1/4th fare students 236 students 3. Calculation of diesel cost per bus in Year 2025: Distance travelled during a month (64 km. × 22 days) 1,408 km. Distance travelled during the year 2025 (1,408 × 8 months) 11,264 km. No. of litres of diesel required per bus per year (11,264 km. ÷ 5 km.) 2252.8 litres Cost of diesel per bus per year (2252.8 litres × ₹ 84.50) 1,90,362

Topics: Service Costing

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