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