High levels of indirect costs as a proportion of total cost
Cost units are often intangible
In service costing it is difficult to identify many attributable direct costs. Many costs must be
treated as indirect costs and shared over several cost units, therefore the first characteristic
does apply. Many services are intangible, for example a haircut or a cleaning service provide
no physical, tangible product. Therefore the second characteristic does apply. The third
characteristic does not apply because equivalent units are more often used in costing for
tangible products. (Chapter 10) |
