Costing .

where commercial tonne km is used . absolute tonne km is more accurate than commercial tonne km. then why commercial tonne km is used
Replies (6)
Quick Summary
This discussion delves into the inaccuracies of commercial tonne kilometre (TKM) costing compared to the absolute TKM method. The absolute method, calculated as distance multiplied by actual weight, is presented as the most accurate way to determine incurred costs. In contrast, the commercial method, using average weight, is deemed flawed and potentially used for tax evasion due to its cost-reducing allocation. The conversation highlights the importance of using the correct formula for precise cost accounting.

Commercial tonne is illegal as per tax laws. It is used for tax evasion as the weighted average allocation of costs increases expenses. 


commercial  method one should be made redundant

 

On the whole this method is wrong, I’ll explain

absolute method = distance * weighted average weight

commercial method= distance *average weight

both are wrong,

the absolute formula= distance*weight

the first formula above reduces costs more than what they incurred

the second formula above increase since costs than what they incurred

the third formula above is giving the exact cost incurred 

it took me 15 minutes to find out the formulas differ. What is the formula that you have

https://icmai.in/upload/Students/PTP2012_Dec14/Inter/Set1/Paper10-Solution.pdf

In the link above, weighted average is wrongly printed maybe.

We have like two methods
first one is third formula
second method the second formula

Please write the formulas here. Txs

Ok Mr. Sasi, that is the right way you got. Weighted average reduces and simple average value but accurate. That weighted average method is used in inventory and capitalising borrowing costs.

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