Service Costing

Service Costing

1. SERVICE COSTING -costing method applied to a business which provides a service rather than a manufactured product.

   • Examples: A Hospital, Firm of Accountancs/Solicitors, Haulage Business, Restaurant, Hotels

2. SERVICE COSTING : Use Composit Cost Units this uses TWO level of activity

   • Examples: Cost per Tonne Mile (Shipping, haulage or Transport ) Cost per Passenger per Mile (Bus, Coach or Train) Cost per Patient per Day (Hospital, Cost per Guest per Night ( Hotels)

3. CHARACTERISTICS OF SERVICE COSTING

   • INTANGIBILITY - No physical existence of the service unlike a produced item
   • LEGAL OWNERSHIP - Little evidence exists for performance, can't return if faulty
   • INTANT PERISHABILITY - Services cannot be stored, unused services cannot be stored for later use
   • HETEROGENEITY - Not perfectly identical, each service is different each time
   • INSEPARABILITY - Service cannot be seperated from the person who provides it