Service Costing
Service costing is a method of costing that is used to determine the cost of services. Services are intangible products that are produced and consumed simultaneously. Examples of services include transportation, healthcare, and education.
Features of Service Costing
Service costing has the following features:
- Intangible products: Services are intangible products that cannot be stored or inventoried.
- Simultaneous production and consumption: Services are produced and consumed simultaneously.
- Varying demand: The demand for services can vary significantly from day to day or from season to season.
- Heterogeneous services: Services are often heterogeneous, meaning that they are not identical.
Applications of Service Costing
Service costing is used in a variety of industries, including:
- Transportation: Service costing is used by transportation companies to determine the cost of providing transportation services.
- Healthcare: Service costing is used by healthcare providers to determine the cost of providing healthcare services.
- Education: Service costing is used by educational institutions to determine the cost of providing educational services.
Unit Costing and Multiple Costing
There are two main types of service costing: unit costing and multiple costing.
- Unit costing: Unit costing is used to determine the cost of a single unit of service. Unit costing is typically used for services that are relatively homogeneous, such as transportation services.
- Multiple costing: Multiple costing is used to determine the cost of multiple units of service. Multiple costing is typically used for services that are heterogeneous, such as healthcare services.
Application
Service costing can be used to:
- Determine the cost of providing a service.
- Set prices for services.
- Control costs.
- Make decisions about service offerings.
Identification of Cost Unit
The cost unit is the unit of measurement used to determine the cost of a service. The cost unit should be chosen carefully to ensure that it is relevant to the decision being made.
Cost Determination and Control
Cost determination is the process of identifying and measuring the costs of providing a service. Cost control is the process of managing costs to ensure that they are within budget.