Page 33 - MA - May 2017

High speed freight trains are used to carry parcels and mails. The transportation of high speed train usually takes
place overnight with late departure and early arrival with some terminals before destination.
Figure 5: Identification of activities of rail freight service

Rail freight service activities

Booking/ Unit Wagon/Train Combined RORO Maintenance Others
Scheduling train Load traffic Service

Activities for Rail Parcel services:
The data of Indian Railways for 2011-12 revealed that railways transported approximately 7 million tonnes of
parcels, causing revenue of nearly Rs 16 billion. However, parcel business is a loss-making activity for railways.
The parcel business of Railways involves three major activities, booking, loading and unloading.
Figure 6: Identification of activities for rail parcel services

Rail Percel service activities

Scheduling Tracking Loading Unloading Maintenance Others
Booking

Step 3: Pooling of cost
Cost pool is defined by CIMA as, ‘the point of focus for the costs relating to a particular activity in an activity based
costing system.’ It refers to the assignment of total costs to an activity. For example, the total cost incurred on the
train ticket examiners will be ascertained. The total cost here will comprise of direct and indirect costs. The direct
cost can be easily ascertained like total emoluments to the ticket checkers in a particular train on particular path.
The example of indirect cost here will be the expense on water by railway in that coach on the staffs of catering,
ticket checkers, cleaning staffs, security staffs and others. The indirect costs will be pooled and can be allocated on
the basis of cost drivers.
Step 4: Determination of cost driver
According to CIMA, ‘cost driver is any factor which causes a change in the cost of an activity, e.g. the quality of
parts received by an activity is a determining factor in the work required by that activity and therefore affects the
resources required. An activity may have multiple cost drivers associated with it.’ In other words, cost driver means
the factors which determine the cost of an activity. The cost drivers are the connecting link between the activities
and the cost. The cost driver can be selected on appropriate basis. The cost drivers can be the following for different
activities:

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