INTRODUCTION TO OPERATING COSTING:

Operating costing is a method of costing applied by undertakings which provide service rather than production
of commodities. Like unit costing and process costing, operating costing is thus a form of operation costing.
The emphasis under operating costing is on the ascertainment of cost of rendering services rather than on the
cost of manufacturing a product. It is applied by transport companies, gas and water works, electricity supply
companies, canteens, hospitals, theatres, school etc. Within an organization itself certain departments too are
known as service departments which provide ancillary services to the production departments. For example:
maintenance department; power house; boiler house; canteen; hospital; internal transport.
Operation costing offers better scope for control. It facilitates the computation of unit operation cost at the end
of each operation by dividing the total operation cost by total input units. It is the category of the basic costing
method, applicable, where standardized goods or services result from a sequence of repetitive and more or less
continuous operations, or processes to which costs are charged before being averaged over the units produced
during the period. The two costing methods included under this head are process costing and service costing.
CIMA has defined Operating Costing As that form of operation costing which applies when standardized
services are provided either y an undertaking or by a service cost center within an undertaking.
Cost Accounting Standard 1 by ICWA defines Operating Cost As the cost incurred in conducting a business
activity. Operating costs refer to the cost of undertakings, which do not manufacture any product but which
provide services.
Because of the varied nature of activities carried out by the service undertaking, the cost system used is
obviously different from that followed in manufacturing concerns.
The essential features of operating costs are as follows:
1. The operating costs can be classified under three categories. For example in the case of transport
undertaking these three categories are as follows:

Operating and Running Charges: It includes expenses of variable nature. For example expenses on
petrol, diesel, lubricating oil, and grease etc.

Maintenance Charges: These expenses are of semi-variable nature and include the cost of tyres and
tubes, repairs and maintenance, spares and accessories, overhaul, etc.

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Fixed or Standing Charges: These includes garage rent, insurance, road license, depreciation, interest
on capital, salary of operating manager, etc.

The cost unit used is a double unit like passenger-mile; Kilowatt-hour, etc. It can be implemented in all firms of
transport, airlines, bus-service, etc., and by all firms of Distribution Undertakings.
Methods of Costing:
Different industries follow different methods for ascertaining cost of their products. The method to be adopted
by business organization will depend on the nature of the production and the type of output.
The following are the important methods of costing.
Job Costing:
Job costing is concerned with the finding of the cost of each job or work order. This method is followed by
these concerns when work is carried on by the customers request, such as printer general engineering work
shop etc. under this system a job cost sheet is required to be prepared find out profit or losses for each job or
work order.
Contract Costing:
Contract costing is applied for contract work like construction of dam building civil engineering contract
etc. each contract or job is treated as separate cost unit for the cost ascertainment and control.
Batch Costing:
A batch is a group of identical products. Under batch costing a batch of similar products is treated as a
separate unit for the purpose of ascertaining cost. The total costs of a batch is divided by the total number of
units in a batch to arrive at the costs per unit. This type of costing is generally used in industries like bakery,
toy manufacturing etc.
Process Costing:
This method is used in industries where production is carried on through different stages or processes before
becoming a finished product. Costs are determined separately for each process. The main feature of process
costing is that output of one process becomes the raw materials of another process until final product is
obtained. This type of costing is generally used in industries like textile, chemical paper, oil refining etc.

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Service (Operating) Costing:

This method is used in those industries which rendered services instead of producing goods. Under this
method cost of providing a service is also determined. It is also called service costing. The organization like
water supply department, electricity department etc. are the examples of using operating costing.
Operation Costing:
This is suitable for industries where production is continuous and units are exactly identical to each other.
This method is applied in industries like mines or drilling, cement works etc. Under this system cost sheet is
prepared to find out cost per unit and profits or loss on production.
Multiple Costing:
It means combination of two or more of the above methods of costing. Where a product comprises many
assembled parts or components (as in case of motor car) costs have to be ascertained for each component as
well as for the finished product for different components, different methods of costing may be used. It is
also known as composite costing. This type of costing is applicable to industries producing motor vehicle,
Aero plane radio, T.V. etc.

Introduction:
Mahindra Holidays & Resorts India Ltd., (MHRIL) is a part of the Leisure and Hospitality sector of
the Mahindra Group and brings to the industry values such as Reliability, Trust and Customer Satisfaction.
Started in 1996, the companys flagship brand Club Mahindra Holidays, today has a fast growing customer
base of over 183,000 members and 45 beautiful resorts at some of the most exotic locations in India and abroad.
Mahindra Holidays & Resorts India Limited is part of the USD 16.7 billion multinational Mahindra Group.
With over 180,000 employees in 100 countries across the globe, the Group is also among Indias top ten
Industrial Houses with interests in aerospace, aftermarket, agribusiness, automotive, components, consulting
services, defense, energy, farm equipment, finance and insurance, industrial equipment, information technology,
leisure and hospitality, logistics, real estate, retail, and two wheelers. Over the last decade, MHRIL has
established itself as a market leader in the family holiday business. The company has followed a two pronged
strategy rapidly increasing its bouquet of resorts to provide more variety in holidaying options and enhancing
its service levels to its members to provide delight at every point of interaction. All MHRIL resorts are totally
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geared to cater to a variety of holiday needs and experiences in all areas of operation, from housekeeping to
food & beverage to holiday activities. Creating and managing the holiday experience is core strength. It is
Indias leading player in the leisure hospitality industry that offers quality family holidays primarily through
vacation ownership memberships. While MHRILs flagship brand is Club Mahindra, some of the other popular
brands offered by the Company are Club Mahindra Fun days and Svaastha Spa. The Companys flagship brand
Club Mahindra today has a fast growing customer base of ~194,000 vacation ownership members and offers
45 resorts across India and abroad. Club Mahindra is committed to creating Magical Moments for its vacation
ownership members when they holiday at one of their 45 resorts. The Company ensures its members take back
memories which last a lifetime; thus forging a long-lasting relationship. With a member base of 1.94 lakhs,
MHRIL has established itself as a leading player in the Leisure and Hospitality Sector in the Indian domestic
market.

RCI Affiliation:
Club Mahindra is affiliated to Resorts Condominium International (RCI), a global holiday exchange network.
MHRIL has the unique distinction of having 26 RCI Gold Crown and 1 Silver Crown Resorts in India, which
bears testimony to the high standards of resort facilities, amenities & services that the Club Mahindra resorts
offer.

Brand Identity:
In October 2013, MHRIL unveiled a new brand logo for its flagship brand Club Mahindra. The Club
Mahindra brand identity stands testimony to the brand commitment of creating Magical Moments for its
members. The Club Mahindra logo is inspired by the thought make every moment magical. Inspired by the
Buddhist mandalas, the symbol is made up of four hearts coming together. The hearts are in vibrant shades of
blue, yellow, orange and green, inspired by the colours of holiday. These hearts symbolize families and friends
coming together.

Expansion:
In FY 15, MHRIL added resorts in Manali & Kanha. Mahindra Holidays has been adding aggressively to its
room inventory. It added more than 500 rooms between 2014 to 2016, and the total room count stands at
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2826.In September 2015, the Company increased its stake to 85.6% in Holiday Club Resorts Oy, Finland
(HCR), and a leading European vacation ownership company. With this acquisition, MHRIL together with
Holiday Club has become the worlds largest vacation ownership company outside the United States. Further,
options of holidaying in Europe at 30 scenic resorts in Finland, Sweden and Spain have also opened up for Club
Mahindra members.

Product Offerings:
Club Mahindra offers its members with a unique leisure hospitality model in that it allows members to enjoy the
amenities of a resort along with a variety of other services and benefits such as food at subsidized rates, fun
activities, spacious accommodation, sightseeing, etc. all in one place. It also provides its Members with
flexibility while planning holidays besides other benefits. By paying an exchange fee, members can also opt to
stay in resorts of affiliated companies in India or abroad as well. Member has to be enrolled to avail usage
through RCI.
As a Club Mahindra member, one can avail 7 Nights 8 Days holiday in each year depending on eligibility and
availability for 25/10 years at any of the 45 resorts the company has in India and abroad. Apart from these, there
are also the around 4500 RCI affiliated resorts across the globe that one could exchange the days / weeks for. In
FY16, 90,000 members have already holidayed with us, where 68% of members have got a holiday of their
first preference and the total number of holidays taken in this financial year is about 3 lakhs.
Members also have the option of splitting their 8-day holiday into smaller holidays of 23 days each. Or one
can enjoy longer holidays of over 7 nights (up to a maximum of 14 nights) in ones own season. If a member
does not use all of 8 days of allotted holidays in a year, the remaining days get carried forward to the next year.
However, this is limited to a total number of 21 nights. These options have been created in order to provide
members with multiple options to plan their perfect holiday. One can also Gift a Holiday to friends and
relatives on payment of a nominal guest fee. Gifting is not allowed during member only days. One can book a
holiday from 4 months in advance or even a day prior to going on holiday, depending on the type of
membership the member holds and the members eligibility and availability.

Member Options:

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The choice of membership is categorized as per the members requirement into colour coded seasons into
Purple, Red, White and Blue, with Purple reflecting holidaying in all season, Red reflecting peak season
preference (excluding some super peak dates like Diwali, Christmas, New Year eve, Independence eve, etc.) and
White and Blue reflecting low-peak seasons. This is subject to availability in the resort of the members choice.
Members also select an apartment type at the time of signing up for the membership. Club Mahindra offers the
option of a studio, a one bedroom apartment or a two bedroom apartment, according to ones needs and family
size/number of adults who can travel together for a holiday. The membership opted for is a combination of
accommodation and season opted for by the member.

Balance Sheet of Club Mahindra Holidays

Mar '15

Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Net worth
Secured Loans
Unsecured Loans
Total Debt

------------------- in Rs. Cr. ------------------Mar '14

Mar '13
Mar '12

Mar '11

12 moths

12 mths

12 mths

12 mths

12 mths

295.70
295.70
0.00
0.00
18,948.6

295.16
295.16
0.00
0.00

295.16
295.16
0.00
0.00

294.52
294.52
0.00
0.00

293.62
293.62
0.02
0.00

16,485.24

14,352.92

11,660.28

9,763.96

16,780.40

14,648.08

11,954.80

10,057.60

294.10
3,451.06
3,745.16

266.67
2,960.40
3,227.07

400.18
2,774.04
3,174.22

407.23
1,913.87
2,321.10

0
19,244.3
0
0.00
2,620.38
2,620.38

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Total Liabilities

Application Of Funds
Gross Block
Less: Revaluation Reserves
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deferred Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Contingent Liabilities
Book Value (Rs)

Profit & Loss account of Club Mahindra

21,864.6

20,525.56

17,875.15

15,129.02

12,378.70

Mar '14

Mar '13

Mar '12

Mar '11

12 mths

12 mths

12 mths

12 mths

12 mths

11,109.91
10.79
5,180.45
5,918.67
2,178.76
13,138.1

10,242.58
10.79
4,365.63
5,866.16
1,228.44

8,602.96
10.84
3,645.10
4,947.02
863.48

7,502.36
216.29
3,216.34
4,069.73
794.73

5,858.26
255.79
2,725.35
2,877.12
773.68

11,379.85

11,833.46

10,310.46

8,925.63

2,803.63
2,509.84
2,950.39
8,263.86
4,539.55
0.00
12,803.41
0.00
8,678.28
2,074.02
10,752.30
2,051.11
0.00

2,419.77
2,208.35
1,781.41
6,409.53
3,389.26
0.00
9,798.79
0.00
7,662.13
1,905.47
9,567.60
231.19
0.00

2,358.39
1,988.36
1,188.43
5,535.18
2,985.59
0.00
8,520.77
0.00
6,721.40
1,845.27
8,566.67
-45.90
0.00

1,694.21
1,260.31
614.64
3,569.16
3,138.40
0.00
6,707.56
0.00
5,223.75
1,681.54
6,905.29
-197.73
0.00

20,525.56

17,875.15

15,129.02

12,378.70

6,421.09
272.46

87.20
238.58

2,307.66
194.71

1,893.85
163.82

8
Mar '15

6
2,437.57
2,558.03
2,064.77
7,060.37
4,638.12
0.00
11,698.49
0.00
9,000.62
2,068.78
11,069.40
629.09
0.00
21,864.6
8
5,419.91
309.85

------------------- in Rs. Cr. -------------------

Holidays
7 | Page

Mar '15

Mar '14

Mar '13

Mar '12

Mar '11

8 | Page

12 mths

12 mths

12 mths

12 mths

12 mths

41,133.11

43,120.18

43,412.65

31,853.52

23,460.26

2,187.69

2,611.68

2,971.49

0.00

0.00

40,508.50

40,441.16

31,853.52

23,460.26

1,184.66

770.78

639.79

574.06

551.63

-323.63

274.67

87.31

597.33

202.23

41,553.95

41,168.26

33,024.91

24,214.12

27,811.64

29,889.44

30,675.27

24,258.94

16,604.88

222.41

221.35

206.39

175.78

143.93

2,316.93

2,163.72

1,866.45

1,701.78

1,431.52

Other Manufacturing Expenses

0.00

0.00

0.00

0.00

0.00

Selling and Admin Expenses

0.00

0.00

0.00

0.00

0.00

4,097.38

3,787.45

3,071.06

2,543.63

2,027.83

0.00

0.00

0.00

0.00

0.00

36,061.96

35,819.17

28,680.13

20,208.16

Mar '15

Mar '14

Mar '13

Mar '12

Mar '11

12 mths

12 mths

12 mths

12 mths

12 mths

Operating Profit

4,173.43

4,721.21

4,709.30

3,770.72

3,454.33

PBDIT

5,358.09

5,491.99

5,349.09

4,344.78

4,005.96

Interest

214.30

259.22

191.19

162.75

72.49

5,143.79

5,232.77

5,157.90

4,182.03

3,933.47

974.90

863.34

710.81

576.14

413.86

0.00

0.00

0.00

0.00

0.00

Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income

38,945.4
2

39,806.4
5

Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost

Miscellaneous Expenses
Preoperative Exp Capitalized
Total Expenses

PBDT
Depreciation
Other Written Off

34,448.3
6

9 | Page

Profit Before Tax

4,168.89

4,369.43

4,447.09

3,605.89

3,519.61

0.00

0.00

0.00

0.00

0.00

4,168.89

4,369.43

4,447.09

3,605.89

3,519.61

847.78

611.08

1,094.27

727.00

857.51

Reported Net Profit

3,321.11

3,758.35

3,352.82

2,878.89

2,662.10

Total Value Addition

6,636.72

6,172.52

5,143.90

4,421.19

3,603.28

Preference Dividend

0.00

0.00

0.00

0.00

0.00

Equity Dividend

745.31

862.25

798.17

767.48

706.08

Corporate Dividend Tax

101.58

104.04

92.98

101.13

96.56

6,210.92

6,158.92

6,139.81

6,139.75

6,139.40

53.47

61.02

54.61

46.89

43.36

Equity Dividend (%)

240.00

280.00

260.00

250.00

230.00

Book Value (Rs)

309.85

272.46

238.58

194.71

163.82

Extra-ordinary items
PBT (Post Extra-ord Items)
Tax

Per share data (Annualized)

Shares in issue (lakhs)
Earnings Per Share (Rs)

------------------- in Rs. Cr. ------------------Cash Flow of Club Mahindra Holidays

Mar '15

Mar '14

Mar '13

Mar '12

Mar '11

12 mths

12 mths

12 mths

12 mths

12 mths

Net Profit Before Tax

3833.17

4316.64

4356.47

3497.62

3402.13

Net Cash From Operating Activities

3219.49

3727.64

4145.71

2734.95

2979.78

-2423.09

-2407.08

-2895.95

-1936.54

-3734.99

-1584.82

-823.93

-1221.89

-306.15

-383.75

-788.42

496.63

27.87

492.26

-1138.96

Opening Cash & Cash Equivalents

1705.61

1208.98

1136.09

695.97

1753.13

Closing Cash & Cash Equivalents

917.19

1705.61

1163.96

1188.23

614.17

Net Cash (used in)/from

Investing Activities
Net Cash (used in)/from Financing Activities
Net (decrease)/increase In Cash and Cash
Equivalents

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COST SHEET FORMAT

Particulars

Amoun
t

Opening Stock of Raw Material

***

Add: Purchase of Raw materials

***

Add: Purchase Expenses

***

Less: Closing stock of Raw Materials

***

Raw Materials Consumed

***

Direct Wages (Labour)

***

Direct Charges

***

Prime cost (1)

Amoun
t

***

Add :- Factory Over Heads:

Factory Rent

***

Factory Power

***

Indirect Material

***

Indirect Wages
Supervisor Salary

***

Drawing Office Salary

Factory Insurance

***
***
***

Factory Asset Depreciation

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***
Works cost Incurred

***

Add: Opening Stock of WIP

***

Less: Closing Stock of WIP

***

Works cost (2)

***

Add:- Administration Over Heads:Office Rent

***

Asset Depreciation

***

General Charges

***

Audit Fees

***

Bank Charges

***

Counting house Salary

***

Other Office Expenses

***

Cost of Production (3)

***

Add: Opening stock of Finished Goods

***

Less: Closing stock of Finished Goods

***

Cost of Goods Sold

***

Add:- Selling and Distribution OH:Sales man Commission

***

Sales man salary

***

Traveling Expenses

***

Advertisement

***

Delivery man expenses

***

Sales Tax

***

Bad Debts

***

Cost of Sales (5)

***

Profit (balancing figure)

***

Sales

***

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