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a) Easy Travel is a transport business operating six passenger vehicles. The business, owned solely by T Hope and located in rented premises, employs one

a)Easy Travel is a transport business operating six passenger vehicles. The business, owned solely by

T Hope and located in rented premises, employs one full time administration officer. T Hope acts as

Transport Manager and drivers are contracted from an agency on the basis of individual jobs. The

business operates vehicles and Type B vehicles.

It is budgeted that each vehicle will complete 48,000 km per year.

The following additional information is provided regarding the business:

Vehicle data Type B

Number of vehicles 2 4

Number of seats per vehicle 48 15

Number of tyres per vehicle

6 4

Vehicle costs

Purchase price per vehicle 60,000 23,000

Trade-in value per vehicle (after 5years) 2,800 1,000

Road fund licence (per vehicle per year) 800 400

Insurance (per vehicle per year) 1,600 800

Servicing (every 12,000 km per vehicle) 300 per service 200 per service

Tyres (renewed per 48,000 km) 200 per tyre 100 per tyre

Fuel consumption (at 0.80 per litre) 1 litre per 3 km 1 litre per 5 km

Depreciation is charged at 20% annually, in equal instalments, on the purchase price of each vehicle

less the cost of the tyres and less its trade-in value after 5 years.

Office costs

Rent 12,000 per year

Insurance 7,400 per year

Administration 18,000 per year

T Hope (Transport Manager) 25,000 per year

Office costs are apportioned to vehicle types on the total number of passenger seats.

Agency driver costs

Cost per day Type A = 80 Type B = 60

Jobs are charged with agency driver costs directly according to time taken.

Both vehicle costs and office costs are absorbed into the cost of jobs at a predetermined rate per

kilometre for each type of vehicle

REQUIRED

(a) For each vehicle type calculate the:

(i) vehicle cost absorption rate per kilometre

(8 marks)

(ii) office cost absorption rate per kilometre. (6 marks)

QUESTION 2 CONTINUED

The following information relates to a job enquiry:

3016/4/05/MA 8

(1) A local club requires transport for 28 passengers to and from a sporting venue.

(2) The distance from the local club to the sporting venue is 200 km.

(3) Both types of vehicle are available for the job.

(4) The job can be completed in one day.

REQUIRED

(b) Calculate the cost to transport the 28 passengers to and from the sporting venue assuming:

(i) Type A vehicle is used

(ii) Type B vehicles are used. (6 marks)

(Total 20 marks)

b)

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