CS Executive Meaning of Service Costs: Scope, Service and Application

CS Executive Meaning of Service Costing: Scope/Service and Application

Online CS Executive Class: service costing is a type of operation costing that is used in organizations that provide services instead of producing goods.

The cost of services is the cost of providing and operating services in a particular sector. In short, services are generally considered to be inducting rather than producing goods. It is the costing method that provides information on how to calculate the operating cost.

Service scope 

The costing services are directly concerned with the classification and accumulation of the cost of the service to the services rendered by undertakings.

Service Cost Features: 

Operating costing is a method of costing.

There is no physical stock of an article when an undertaking renders a service.

An undertaking adopting a costing service shall not produce any tangible goods. These undertakings provide their customers with unique services.

Costs are usually period-wise. However, in the case of the use of vehicles, the use of road rollers, etc., the costs are calculated on the basis of the order.

Uniform services are provided to all customers.

Costs shall be classified as fixed and variable.

In order to determine the cost of service and the unit cost of service, fixed and variable cost classification is necessary.

If an undertaking operates a cost center, there is no sale of the service, but the service is rendered. In other words, if the cost center operates for the public, it sells its service to the public.

In certain cases, the cost unit may be simple or composite or compound in other cases, such as transport undertakings.

The cost unit may be either simple or composite. Examples of simple cost units – cost per unit of electricity supply, cost per litre of water supply, cost per unit of electricity supply.

per meal at the canteen, etc. In the same way, the cost per passenger-kilometer of transport costs per patient-day in a hospital, the cost per hotel room-day are examples of a composite cost unit.

The total cost is more than the total amount of service rendered.

Costs are collected from authentic documents such as the daily log sheet, operating cost sheet, boiler house cost sheet, canteen cost sheets, etc.

The operating cost is the cost of the rendering of the service.

Productive enterprises can quote prices by checking the cost data.

Application of the cost of services:

Service costing shall be applied to the operations in question in an organization providing services to production departments. For example, Canteen for the staff, Hospital for the staff, Boilerhouse for the supply of steam to the production departments, Captive Power generation unit, operation of a fleet of vehicles for the transport of raw materials to the factory or distribution of finished goods.

When services are offered to outside customers with a profit motive and it is the business of the organization in offering services, like Transport organization, Hotel business, Power Generation Company etc., Service Costing is applied. The method of costing is similar to Output Costing. All costs incurred during a period are collected and analyzed and then expressed in terms of a cost unit of service.

For a detailed explanation of Service Costing and its features, click on CS Executive online classes.

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