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Service Costing

Service costing is a cost accounting method used to establish the costs of services provided in various industries like transportation, hotels, tourism, education, and financial services. It is also applied within manufacturing to calculate costs of services like transportation, catering, IT, accounting, and human resources. The main differences between service and product costing are that services typically involve few materials and higher overhead costs, with labor potentially comprising 70% of costs. Service costing can be used both to manage costs internally and to set prices when services are subcontracted to other organizations. Examples of subcontracting include payroll services and selling excess computer processing capacity. Common cost units for services include passenger or tonne miles, meals, housekeeping, and staff

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1K views6 pages

Service Costing

Service costing is a cost accounting method used to establish the costs of services provided in various industries like transportation, hotels, tourism, education, and financial services. It is also applied within manufacturing to calculate costs of services like transportation, catering, IT, accounting, and human resources. The main differences between service and product costing are that services typically involve few materials and higher overhead costs, with labor potentially comprising 70% of costs. Service costing can be used both to manage costs internally and to set prices when services are subcontracted to other organizations. Examples of subcontracting include payroll services and selling excess computer processing capacity. Common cost units for services include passenger or tonne miles, meals, housekeeping, and staff

Uploaded by

vir_89
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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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 - Passenger miles,

tonne miles, total miles driven

Hotels -

housekeeping, meals, room service

Education canteen services, office

services, janitorial staff

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