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Like manufacturing sector companies in the service sector, generally adopt one out of the following two basic costing methods to assign costs to services. These are:
1. Job costing method: In job costing method the cost of a particular service is obtained by assigning costs to a distinct identifiable service. In service sector like Accounting firm, Advertising campaigns etc. job costing method is used. For assigning indirect costs (overheads) models such as Activity Based Costing may be used.
2. Process costing method: In process costing system the cost of a service is obtained by assigning costs to masses of similar unit and then computing unit cost on an average basis. Retail banking, Postal delivery, Credit card etc. uses process costing method.
3. Hybrid costing method: Many companies uses a method of costing which is neither job costing nor process costing method. They in fact uses a hybrid costing method which combines elements of both job costing and process costing methods.
