Lecture Management accounting: An Australian perspective: Chapter 6 - Kim Langfield-Smith

Lecture Management accounting: An Australian perspective - Chapter 6 introduce the service costing. After studying this chapter you will be able to understand what are service organisations? Cost classifications in service organisations.
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Lecture Management accounting: An Australian perspective: Chapter 6 - Kim Langfield-Smith Chapter 6 Service CostingCopyright 2003 McGraw-Hill Australia Pty Ltd, PPTs t/a Management Accounting: An Australian Perspective 3/e by Langfield-Smith, Thorne & Hilton Slides prepared by Kim Langfield-SmithService organisations …organisationsthatdeliverhelp,utilityor care,providinganexperience,information orotherintellectualcontentwherethe majorityofthevalueisintangiblerather thanresidinginanyphysicalproductsCopyrightª2003McGrawHillAustraliaPtyLtd, 2Service vs. manufacturingbusinesses Mostservicesareintangible Serviceoutputsareoftenheterogeneous Servicesareoftenconsumedastheyare produced Servicesareperishableandcannotbe storedCopyrightª2003McGrawHillAustraliaPtyLtd, 3Other aspects of services Retailersandwholesalersarepartofthe servicesector Differentcharacteristicstomostservicefirms Providetangiblegoodsaswellasservices Servicesareproducedoutsidetheservice sector Mostmanufacturingfirmsprovideaservice componenttotheirproduct Upstreamanddownstreampartsofthevalue chainmayproduceservicesCopyrightª2003McGrawHillAustraliaPtyLtd, 4Cost classifications inservice firmsCopyrightª2003McGrawHillAustraliaPtyLtd, 5The value chain in servicefirms continuedCopyrightª2003McGrawHillAustraliaPtyLtd, 6The value chain in servicefirms Upstreamactivitiesandcosts OnlylargefirmsmayhaveR&Danddesignactivities Downstreamactivitiesandcosts Marketingandcustomersupport Productionanddeliveryactivitiesandcosts Productionanddeliverymayoccursimultaneously Directlabourmaydominateandmaterialnotsignificant Upstreamanddownstreamcostsmayberegarded asoverheadcostsforservicecostingpurposesCopyrightª2003McGrawHillAustraliaPtyLtd, 7The value chain of retailersand wholesalers Upstreamactivitiesandcosts R&Danddesignunlikelytoberelevant Purchasingactivitiesimportant Productionactivitiesandcost Thesalestransactionandoftendistribution included Downstreamactivitiesandcost Marketingactivities,deliveryandcustomer supportimportantCopyrightª2003McGrawHillAustraliaPtyLtd, 8Types of service entitiesCopyrightª2003McGrawHillAustraliaPtyLtd, 9Professional services Staffedbyprofessionalstaffwhoprovide personalservicesandserverelativelyfew customers Thefrontofficeismoreimportantthanthe backoffice Examples:medical,legal,accounting, managementconsulting,andarchitectural businessesCopyrightª2003McGrawHillAustraliaPtyLtd, 10Mass services Involvemanycustomers,eachone requiringlimitedstafftimeandlimited customisation Staffaremainlynonprofessional Mostofthevalueisinthebackoffice,not thefrontoffice Examples:busandtraincompanies,airline companies,postoffices,electricitysupplies, telecommunicationscompanies,public serviceorganisationsCopyrightª2003McGrawHillAustraliaPtyLtd, 11Service shops Fitbetweenprofessionalandmassservice businessesintermsofnumberof customers,stafftimeanddegreeof customisation Examples:hotelchains,banks,cafésand restaurants,printshopsandcarrepair workshopsCopyrightª2003McGrawHillAustraliaPtyLtd, 12Costing systems for service entitiesCopyrightª2003McGrawHillAustraliaPtyLtd, 13Job costing for professionalservice firms Professionalservicefirmshavelimited materialorequipment,produceno inventories Professionalfirmssuitajobcosting environment Fewclientsandjobs Theproductionprocessforeachclientisunique Labourcostcanbetraceddirectlytoindividual servicesCopyrightª2003McGrawHillAustraliaPtyLtd, 14Process costing for (some)mass service firms Servicesareproducedinlargequantities,so individualtrackingofcostsisnotfeasible Productionprocessesarerepetitive,limited roomforcustomisation Variousservicesconsumesimilarresources Substantialindirectlabour Coststrackeddirectlytoproductionprocesses Processcostingwillnotprovideaccurate trackingofcoststoservices,wherethescope fordiscretioninservicedeliveryishighCopyrightª2003McGrawHillAustraliaPtyLtd, 15Hybrid costing systems Suitableforsomeserviceshopsandsome massserviceentities Varyingdegreesofcustomisation ...