Characteristics of Service sector costing.

Main characteristics of service sector are as below:
(a) Activities are labour intensive: The activities of service sector generally are labour intensive. The direct material cost is either small or non-existent.

(b) Cost-unit is usually difficult to define: The selection of cost units usually, for service sector is difficult to ascertain as compared to the selection of cost unit for manufacturing sector. The following table provides some examples of the cost units for service sector.
• Hospital – Patient per day, Room per day
• Accounting firm – Charged out client hours
• Transport – passenger km., quintal km.
• Machine maintenance – Maintenance hours provided to user department
• Computer department – Computer time provided to user department.

(c) Product costs in service sector: Costs are classified as product or period costs in manufacturing sector for various reasons.
Share This
Previous Post
Next Post