Service costing
Service costing is a costing method for businesses that sell services rather than physical units, using a composite cost unit such as cost per tonne-kilometre or per occupied bed-night.
See it move
A hospital ward's monthly running cost of €96,000 is divided by the composite service unit actually delivered: 800 occupied bed-nights, from 40 beds each occupied for 20 of the month's 30 nights. Cost per occupied bed-night is €96,000 ÷ 800, or €120, the figure used for benchmarking and budgeting.
The formula
Variables
- Cost per service unit (€)
- Total cost of the service (€)
- Number of composite service units (units (e.g. tonne-km, bed-nights))
Gives the cost of one composite service unit — such as a tonne-kilometre or an occupied bed-night — for pricing and benchmarking.
Check yourself
A hospital ward's running costs for the month are €78,000. The ward has 30 beds, each occupied for an average of 26 nights during the 31-day month. What is the cost per occupied bed-night?