TRL3706
ASSIGNMENT 1 2024
DUE: AUGUST 2024
SEMESTER 2 2024
, Assignment 01 S2: 2024
DBA CC is a transport company that provides both freight and passenger road
transport services. Describe the purpose of activity-based costing and how it is
when costing transport services.
Purpose of Activity-Based Costing (ABC) in Transport Services
Activity-Based Costing (ABC) is a method used to assign costs to products or services
based on the activities that go into producing them. In the context of a transport
company like DBA CC, which offers both freight and passenger services, the purpose
of ABC is to accurately allocate indirect costs to each service type. This method helps
the company understand the true cost of delivering each service, leading to better
pricing, resource allocation, and profitability analysis.
1. How ABC is Applied in Costing Transport Services
The first step is to identify all the activities involved in providing transport services.
For DBA CC, this might include activities such as vehicle maintenance, fuel
consumption, driver wages, scheduling, loading and unloading, and customer
service.
2. Assign Costs to Activities
Once the activities are identified, the associated costs are assigned to these
activities. For instance, fuel costs might be associated with both freight and
passenger services, but driver wages could be split based on time spent on each
service.
3. Determine Cost Drivers
Cost drivers are the factors that directly influence the costs of each activity. In
transport services, common cost drivers might include the number of trips, distance
traveled, or the number of passengers or freight loads.
4. Calculate Cost Driver Rates:
ASSIGNMENT 1 2024
DUE: AUGUST 2024
SEMESTER 2 2024
, Assignment 01 S2: 2024
DBA CC is a transport company that provides both freight and passenger road
transport services. Describe the purpose of activity-based costing and how it is
when costing transport services.
Purpose of Activity-Based Costing (ABC) in Transport Services
Activity-Based Costing (ABC) is a method used to assign costs to products or services
based on the activities that go into producing them. In the context of a transport
company like DBA CC, which offers both freight and passenger services, the purpose
of ABC is to accurately allocate indirect costs to each service type. This method helps
the company understand the true cost of delivering each service, leading to better
pricing, resource allocation, and profitability analysis.
1. How ABC is Applied in Costing Transport Services
The first step is to identify all the activities involved in providing transport services.
For DBA CC, this might include activities such as vehicle maintenance, fuel
consumption, driver wages, scheduling, loading and unloading, and customer
service.
2. Assign Costs to Activities
Once the activities are identified, the associated costs are assigned to these
activities. For instance, fuel costs might be associated with both freight and
passenger services, but driver wages could be split based on time spent on each
service.
3. Determine Cost Drivers
Cost drivers are the factors that directly influence the costs of each activity. In
transport services, common cost drivers might include the number of trips, distance
traveled, or the number of passengers or freight loads.
4. Calculate Cost Driver Rates:
