CIMA BA2 Syllabus C. PLANNING AND CONTROL - Composite Cost Units - Notes ^{3 / 7}

Suitable unit cost measures that may be used in different service/operation situations

The main problem with service costing is the difficulty in defining a realistic cost unit that represents a suitable measure of the service provided. 

Frequently, a composite cost unit may be deemed more appropriate. 

Therefore, more than one variable will be considered.  

The reason for this is that with service industries, more than one thing affects the cost. 

Let us consider baggage on an airline, the weight of the baggage and the km travelled by the plane will affect how much fuel cost is needed. Therefore, the composite cost unit here will be $ per kilo per km travelled.

Another example can be hotels, for example, may use the 'occupied bed-night' as an appropriate unit for cost ascertainment and control.

Typical cost units used by companies operating in a service industry are