Service Costing n n A cost accounting method

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

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

The Differences Between Product Costing and Service Costing n There may be very few, if any, materials to worry about n 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? n Many organisations simply want to determine the costs of operating its services from a management control and management information point of view n 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 n n 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 n What are the cost units for a service? u Transport - Passenger miles, tonne miles, total miles driven u Hotels - u Education – canteen services, office housekeeping, meals, room services, janitorial staff