SERVICE COST UNIT

SERVICE COST UNIT

To compute the Service cost, it is necessary to understand the unit for which the cost is to be computed. All the costs incurred during a period are collected and analyzed and then expressed in terms of a cost per unit of service.

One specific issue with service costing is the difficulty in defining a realistic cost unit that represents a suitable measure of the service provided. The cost unit to be applied needs to be defined carefully and frequently, a composite cost unit may be deemed more appropriate.

For example, Hotels may use the ‘Occupied Room Days’ as an appropriate unit for cost ascertainment and control.

Other typical cost unit that may be used include:

Service industry	Unit of cost (examples)
Transport Services	Passenger- km., (In public transportation) Quintal- km., or Ton- km. (In goods carriage)
Electricity Supply service	Kilowatt- hour (kWh)
Hospital	Patient per day, room per day or per bed, per operation etc.
Canteen	Per item, per meal etc.
Cinema	Per ticket.
Hotels	Guest Days or Room Days
Bank or Financial Institutions	Per transaction, per services (e.g. per letter of credit, per application, per project etc.)
Educational Institutes	Per course, per student, per batch, per lecture etc.
IT & ITES	Cost per project, per module etc.
Insurance	Per policy, Per claim, Per TPA etc.

The costing should be comprehensive enough to show the effects like off-season and peak-season demand, full time, part time, etc.