Page 32 - MA - May 2017

COVER ST OR Y

Step 1: Identification of resource cost: Step 2: Identification of activities:
The first step in ABC costing is the identification of After the identification of manufacturing processes
resource cost. The resource cost can be obtained from and services, different activities involved with the
the general ledger of railways. It will be segregated manufacturing and the services are identified. The
into direct costs and indirect costs. The manufacturing activities can be of basically four types:
processes and services provided and the various stages (1) Unit level activities: These are activities
of manufacturing and services will be identified for for which the consumption of resources can be
the purpose of identification of resource cost. The identified with the number of units produced.
direct resource cost will be directly allocated to the (2) Batch level activities: The costs of some
particular service of rail and the indirect resource activities are driven by the number of batches of
cost will be allocated to activities with the help of cost units produced or services produced in batch.
drivers. Hence, different kind of services provided by (3) Product level activities: The costs of some
the railways will be identified to obtain the resource activities are driven by the creation of a new product
cost. The services of railways can be divided into three line or service or maintenance of product and
broad categories, freight services, passenger services, service.
and parcel business. (4) Facility Level Activities: Facility level
For the rail freight system the different resources are activity relates to the activities necessary for the
Rolling stock, Organizational structure, Infrastructure, maintenance of sustaining the product or services
Train operation and other resources like energy. These provided. For example, human resource activities,
resources can be grouped under activities like train load, security services in rail.
wagon load, combined traffic and high speed rail freight, Generally, the activities identified in railways are
dedicated freight corridor and others. batch level and facility level activities.

Activities for Rail passenger services:
The services provided by railways can be broadly classified under passenger transport, parcel business and
rail freight. The activities involved in passenger transport services will be identified as ticketing, boarding, ticket
examination, catering, cleanliness, repair and maintenance, human resources, account and finance, etc.
Figure 4: Identification of activities for rail passenger services

Passenger transport service activities

Ticketing Scheduling Ticket Catering Cleanliness Maintenance Others
examination

Activities for Rail Freight Services:
The different activities for the rail freight system can be train load, wagon load, unit train, combined traffic, high
speed rail freight, dedicated freight corridor and others.
Train load activity serves to transport raw materials in bulk and the transportation time is less than one day.
Wagon load is the oldest and traditional form of rail freight transport. It transports raw material and semi finished
goods. The whole wagon is loaded or unloaded by the customer at loading platform. The loading or unloading can
be for single wagon or group of wagons. Wagon load traffic serves the base market.
Unit train is the freight train where the rail acts as a conveyor belt to transport the freight in bulk. Unit train
serves the specified customer as per the time table of customer. Generally, the unit trains carry iron ore, timber,
steel, and oil.

32 The Management Accountant l May 2017 www.icmai.in