Chapter 11 MA1

State which of the following are characteristics of service costing.

• High levels of indirect costs as a proportion of total costs.

• Use of composite cost units.

• Use of equivalent units.

Specific characteristic of service costing

• Intangibility

• Simultaneity

• Perishability

• Heterogeneity

The companies that produce many different products usually use:

• Process costing

• Job Order Costing

• Service Costing

• None of the above

When is service costing used?

• When indirect costs are a small proportion of total costs

• When overhead absorption is straightforward

• When the absence of a physical product makes it impossible to determine unit costs

• When the output is intangible

Which one of the following is most likely to operate a system of service costing?

• A printing company.

• A hospital.

• A furniture manufacturer.

• An air-con manufacturer.

Which of the following would be appropriate cost units for a transport business?

• Cost per tonne-kilometre

• Fixed cost per kilometre

• Maintenance cost of each vehicle per kilometre

Calculate the most appropriate unit cost for a distribution division of a multinational company using the following information.
Miles travelled 636,500
Tonnes carried 2,479
Number of drivers 20
Hours worked by drivers 35,520
Tonne/miles carried 375,200
Costs incurred $562,800

• 0.88

• 1.50

• 15.84

• 28140

What is the primary purpose of service costing in a business?

• To determine the cost of physical goods produced

• To allocate costs to services provided

• To calculate profit margins on products

• To assess employee performance

In which scenario would a company most likely use job order costing?

• For a mass production factory

• For a custom furniture maker

• For a utility service provider

• For a software development firm