Service Costing: is “cost accounting for services or functions, eg.

Canteen, maintenance , personnel. This may referred to as service centre,

departments or functions.

Service Composite Cost Unit

• Road, rail and air transport Passenger, Km, tonne Km
• Hotels Occupied bed-night
• Education Full time student
• Hospitals Patient day
• Catering establishments Meal served

Cost per Unit for service industry should be calculated as follows:

Total costs for the period / Composite cost units

General aspects of performance measures that would be appropriate

for a service sector company

Competitiveness

Financial performance

Quality of service

Innovation

Effective and efficient utilisation of resources

Question # FFQA1
Which one of the following is most likely to operate a system of
service costing?
A printing company
B hospital
C firm of solicitors

Question # FFQA2
Which of the following are correct with regard to service
organisations?
(i) Activity based costing would not be considered appropriate.
(ii) The cost of materials will be relatively small.
(iii) A significant proportion of the costs incurred will be fixed and indirect.
A (i), (ii) and (iii)
B (i) and (ii) only
C (i) and (iii) only
D (ii) and (iii) only.

Prepared by: Mohammad Faizan Farooq Qadri Attari

http://www.ffqacca.co.cc
faizanacca@yahoo.com
Question # FFQA3
Which of the following would be considered a service industry?
(i) an airline company
(ii) a railway company
(iii) a firm of accountants
A (i) and (ii) only B (i) and (iii) only
C (ii) and (iii) only D (i), (ii) and (iii)

Question # FFQA4
The following statements relate to responsibility centres:

(i) Return on capital employed is a suitable measure of performance in both

profit and investment centres.

(ii) Cost centres are found in manufacturing organisations but not in service
organisations.

(iii) The manager of a revenue centre is responsible for both sales and costs in a
part of an organisation.

Which of the statements, if any, is true?

A (i) only
B (ii) only
C (iii) only
D None of them

Prepared by: Mohammad Faizan Farooq Qadri Attari

http://www.ffqacca.co.cc
faizanacca@yahoo.com