Service Costing
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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
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Service Costing
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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
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The Differences Between Product
Costing and Service Costing
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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?
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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
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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
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What are the cost units for a service?
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Transport - Passenger miles,
tonne miles, total
miles driven
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Hotels -
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Education – canteen services, office
housekeeping, meals, room
service
services, janitorial staff