Service Costing



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tarix13.05.2023
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ServiceCosting

Service Costing

  • A cost accounting method concerned with establishing the costs of services rendered
  • Examples of where service costing is applied:
    • Transport
    • Hotels
    • Tourism
    • Solicitors
    • Education
    • Retail distribution
    • Financial services

Service Costing

  • Service costing is also applied within a manufacturing setting
  • For example:
  • a manufacturer might wish to calculate the costs of the following services:
    • Transport
    • Catering
    • Computing and IT
    • Accounting
    • Human resources

The Differences Between Product Costing and Service Costing

  • There may be very few, if any, materials to worry about
  • Overheads will comprise the most significant portion of any costs of which, labour costs may well comprise as much as 70%

Service Costing: profit or cost centre?

  • Many organisations simply want to determine the costs of operating its services from a management control and management information point of view
  • However, there are many organisations now that operate services for their own organisations as well as sub-contracting them out to other organisations.

Sub-contracting Examples

  • There are companies that operate their own payroll section for themselves; and offer this service to other organisations as well
  • Other organisations sell CPU time on their computers at times when they do not use it themselves: for example, in overnight batch work.

Service Cost Units

  • What are the cost units for a service?
    • Transport -
    • housekeeping, meals, room service
    • Hotels -
    • Education –

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