Learning Materials For Accounting, Management , Finance And Economics.

Wednesday, October 20, 2010

Concept And Meaning Of Service Costing And Types Of Services

Services or activities, having public utilities, need to determine cost of the services or activities offered. A public utility undertaking, offering services to a community rather than manufacturing a tangible product, uses service costing.

The service or function, having public utilities, covers water supply service, electricity supply service, transport service, hospital service, library service, canteen service, park service, hostel service etc. Each service is unique and needs a different accounting treatment. An intelligent selection of unit cost is required to obtain a meaningful cost comparison. A correct choice of unit cost provides correct cost analysis for decision making destined for effective cost control and reduction.

Unit cost expression for a transport undertaking may be the cost per running kilometer, cost per effective kilometer, cost per tonne kilometer, or the cost per passenger kilometer. The cost per kilowatt or unit is the expression appropriate for a hydro power generating undertaking. The cost per patient, cost per patient day, cost per out-door patient, cost per minor or major operation, cost per room may be the potential latitude of an expression of cost for medical institute.

Types Of Services

The diverse nature of services offered to the public poses a difficulty to make a sharp division of services. However, services are categorised into the following four major categories on the basis of their common features.

* Transport services
* Supply services
* Welfare services
* Municipal services