Question 10.RQ.3: Happy Returns Ltd operates a haulage business with three veh...
Happy Returns Ltd operates a haulage business with three vehicles. The following estimated operating costs and performance data are available:
Petrol £0.50 per km on average
Repairs £0.30 per km
Depreciation £1.00 per km, plus £50 per week per vehicle
Drivers ’ wages £300.00 per week per vehicle
Supervision costs £550.00 per week
Loading costs £6.00 per tonne
During week 26 it is expected that all three vehicles will be used, 280 tonnes will be loaded and a total of 3,950 km travelled (including return journeys when empty) as shown in the
following table:
Tonnes carried Kilometres
Journey (one way) (one way)
1 34 180
2 28 265
3 40 390
4 32 115
5 26 220
6 40 480
7 29 90
8 26 100
9 25 135 280 1,975
Requirements
(a) The total variable operating cost incurred in week 26 was £ \boxed{ \ \ \ \ \ \ \ \ \ \ \ \ } .
(b) The total fixed operating cost incurred in week 26 was £ \boxed{ \ \ \ \ \ \ \ \ \ \ \ \ } .
(c) The total cost for week 26, including administration cost, amounted to £13,265. To the nearest penny, the average total cost per tonne-kilometre for week 26 was £ \boxed{ \ \ \ \ \ \ \ \ \ \ \ \ } .
● This question provides an example of the use of a composite cost unit. The cost per tonne-kilometre is the cost of transporting 1 tonne for 1 km
(a) £8,790
(b) £1,600
(c) £0.20
Workings:
Tonne-kilometres
Journey Tonnes carried km Tonne-km
1 34 180 6,120
2 28 265 7,420
3 40 390 15,600
4 32 115 3,680
5 26 220 5,720
6 40 480 19,200
7 29 90 2,610
8 26 100 2,600
9 25 135 3,375
280 1,975 66,325
£
Variable operating costs
Loading: 280 × £6 1,680
£ per km
Running costs: Petrol 0.50
Repairs 0.30
Depreciation 1.00
1.80 × 3,950 7,110
8,790
Fixed operating costs £
Depreciation (3 × £50) 150
Supervision 550
Drivers ’ wages (3 × £300) 900
1,600
Total operating cost 10,390
Average total cost per tonne-kilometer = \frac{£13,265}{66,325} = £0.20