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Service Costing: Service Costing Is A Type of Operation Costing Which Is Used in Organizations Hospital Service

Service costing is a method used to determine the cost of providing services. All costs incurred in providing a service are totaled and divided by the number of service units to calculate the per unit cost. This allows services, which are intangible, to be priced appropriately. As an example, the total cost of providing one bus trip is divided by the number of seats to calculate the ticket price. Transportation service costing similarly totals all fixed and variable costs and divides by units like passenger kilometers to determine unit costs. Accurately calculating service costs is important for pricing services.

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520 views1 page

Service Costing: Service Costing Is A Type of Operation Costing Which Is Used in Organizations Hospital Service

Service costing is a method used to determine the cost of providing services. All costs incurred in providing a service are totaled and divided by the number of service units to calculate the per unit cost. This allows services, which are intangible, to be priced appropriately. As an example, the total cost of providing one bus trip is divided by the number of seats to calculate the ticket price. Transportation service costing similarly totals all fixed and variable costs and divides by units like passenger kilometers to determine unit costs. Accurately calculating service costs is important for pricing services.

Uploaded by

satya
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Service Costing

Hospital Service :
Service costing is a type of operation costing which is used in organizations
……….. Hospital
which provide services instead of producing goods. In this method of cost Operating Cost sheet for the Month / Year
accounting, all the costs incurred in the production of a service are added together. Particulars amount
They are then divided by the total number of service units rendered. The total cost
Fixed or Standing charges :
is then divided by the total units to arrive at per unit cost. Since services are -Hospital rent, Administrative expenses , Insurance premium,
intangible entities, it is important to accurately determine their cost so as to be able Interest expenses, Service tax , General expenses xxxx
to price them appropriately. -Doctor’s salary, Nurse’s salary xxxx
-Depreciation , Repair and maintenance cost xxxx
Example:
A. Total Fixed Cost xxxx
The total cost incurred in providing one bus trip is divided by the number of seats
for passengers to arrive at the cost of each ticket.
Variable or Running charges :
-Cost of medicine, Dispensary expenses, Food charges xxxx
Transportation Service : -Cost of Oxygen, X-ray, Lab expenses, Laundry charges xxxx
……….. Transport Company Ltd. - Lighting and heating expenses xxxx
Operating Cost sheet for the Month / Year -Fee for visiting doctors
Particulars amount B. Total Variable Cost xxxx

Fixed or Standing charges : Total operating cost (A+B) xxxx


-Garage rent, Insurance premium, Interest expenses, Add : Profit xxxx
Route license and Road tax , Registration charges xxxx
-Driver’s salary, Conductor’s wages, Sundry expenses xxxx Total Bill amount / Charges xxxxx
-Depreciation (if total life is given in years or in .) ..% xxxx
-Repair and maintenance cost (if given in per annum) xxxx
No. of patient day = No. of beds x Operating days x Occupancy %
A. Total Fixed Cost xxxx
Amount of profit :
Variable or Running charges : (a)If profit % is given in cost
-Cost of fuel, Petrol, Diesel, Grease, Tyres and tubes, Cost of Profit = Total operating cost x profit %
spare parts, Stationery expenses xxxx 100
-Depreciation (if total life is given in KM.) xxxx
- Repair and maintenance cost (if given in per month) xxxx (b) If profit % is given in bill amount, freight amount - Other than cost
Profit = Total operating cost x profit %
B. Total Variable Cost xxxx 100 – profit %

Total operating cost (A+B) xxxx


Add : Profit xxxx

Total Fare/ Freight xxxxx

Total KM = Distance per trip x No. of trips x 2 (for round trip ) x Operating days x
No. of vehicles
Total Passenger KM = Total KM x No. of seats x Occupancy %

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