Lecture notes
Service Costing
- Institution
- The University Of Manchester (UOM)
Comparing the costs for service and manufacturing sectors and coming up with way to allocate the costs for service sector.
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By: bhumi • 8 year ago
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Lecture 5: Service CostingThis lecture forms the last art of the costing topic and is a more theoretical one. Throughout the
lecture we will be differentiating between the service and the manufacturing sector, analyse the cost
using different methods and understand the process of hybrid costing.
Service Organisations
Service sector is the one providing service to the community, for example doctor, airline services,
lawyers, consultants etc. However it should also be kept in mind that the service sectors are not
limited to individual service providers. Any kinds of after sales services provided after the purchase
of the product form a part of the service department. Some economies depend more on the service
sector than the others, for example the economy of countries like Maldives and seycheles depends
largely on the tourism sector.
Differentiating Service Organisations Manufacturing organisations
factor
Tangibility Outcomes are intangible and The customer actually walks out with a
performance based product or more tangible outcomes
Homogeneity Each client experiences a slightly Outcomes are more or less homogeneous
different services or the outcomes until the products are customised
are more heterogeneous
Consumption Services are consumed at the time Products may be consumed at a later
time when given stage
Storage Services can’t be stored Products can be stored
Cost Classification in the Service organisations:
The service sector therefore experience very different types of costs than the manufacturing
departments.
The Value Chain in the service firms:
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