CA Intermediate · Cost and Management Accounting · Service Costing
In service costing, which of the following is a feature that distinguishes service costing from product costing?
The distinguishing feature of service costing is the intangibility of output and the absence of inventory. A service is consumed as it is produced and cannot be stored, so stock valuation issues largely disappear, unlike in manufacturing where WIP and equivalent units matter.
- AIntangibility of output and absence of inventoryCorrect
- BUse of work-in-progress valuation at each stage
- CComputation of equivalent units
- DSeparate cost sheets for each batch
Explanation
Services are intangible and cannot be stored, so there is no closing stock of finished output. Equivalent units, WIP valuation and batch cost sheets are features of process or batch costing of manufactured goods.
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