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Overseeing Service Operations

Discuss About The Intangible Factors Three Service Industries?

Costing is a process which includes recording, analyzing, classifying, allocating and evaluating various alternative course of action to control the cost of a good or a service. The main goal of costing is to advice and counsel the management about the appropriate course of action that should be taken on the basis of cost capability and efficiency. Management can obtain detailed cost information of a product or service in order to control current costs as well as the futuristic costs by applying costing procedures.

This definition offers a lot of knowledge when connected to the idea of operational administration. Without an unmistakable decent to ship, handle and create, operational administrators are rather centered on the execution of a movement to fill a purchaser require. This administration of an example is preferably not the same as the administration of an item.

Overseeing operations is similarly as basic on the administration side as it is on the item side. While there are incalculable contemplations to be made, a large number of which are remarkable to particular associations or enterprises, these center operational choices are solid signs of the attitude of the service administration experts.

Today market competition is very high and service providers are continuously searching for ways to maintain and reduce their costs and increase productivity. The concept of costing accounting was initially introduced for manufacturing industries but over the period of time it has proven useful in service industry as well. Cost accounting application can help in making an appropriate picture of the relationship between costs and its behaviors towards the outputs.

By adopting cost accounting approach in a service industry you can achieve optimum level of resources with increase in profit, some of the methods of costing are below. As compared to product service is defined by its five components give below.

Service do not possess a physical state it cannot be touched neither it can be transported, taken care of handling or looked at. They are known by their happening and are not a material item (Bei & Chiao, 2006).
As compared to the material substances services can be stored or saved for later use either they happen or occur or they do not occur

Services are not a substance that can be segregated into parts likely to other material goods, which influence the operations management in a quite distinguished manner


Services tend to be exclusive, for instance a teacher may teach you a topic in her own way and the other teacher may teach you the same topic in her own way so the services standalone they differ from person to person enterprise to enterprise

The service receivers are also involved and connected with the delivery of the services they get. As an example we can take the case of a hair dresser shop, a hospital, security and many others routinely examples can well define the services

There are several methods of costing that one can use to calculate the cost of services. First is process Costing for services that are homogenous and repetitive in nature. Example include check process in bank, dental services and oil changing of machines. Second, ABC Costing is used to allocate the overhead costs of a service to the actual consumption by each activity.

Due to various factors and benefits are involved managers need the relative information of cost in order to;

  • Increase Service Revenue
  • Decrease Service Cost
  • Utilize Optimum Resources
  • Improve Level of Customer Satisfaction
  • Forecast The Revenues
  • Analyze The Market Share
  • Analyze The Market Growth
  • Stand in The Market
  • Make Budgets
  • Set The Standards
  • Decision Making
  • Compare Actual V/S Standards

Without this information manager are unable to observe that how service industry will grow, however a lot of expertise and experience is required to perform such type of task. Costing accounting is mainly used for aiding in decision making its proven to be most beneficial as a tool for managers in making the budgets and in setting up the cost at their desired level, which can improve company profits in future.

The most critical determination you have to take up as manager of your goods and services is allocation of the prices, and the price you set is one of the major indicators of the ultimate revenues or losses that your trade will incur. Hence, in your best knowledge you must make sure that you are completely known to the aspects that can affect your pricing policies and the favorable circumstances that can increase your revenues. Following are the pricing barriers that may affect your income and profits.

Selling without determining accurate costs; pricing your services without determining the accurate costs can lead your business face severe challenges when calculating your cost, all the expenses and your wages along with the overheads and utility expenses must be included. Setting the prices considering the one of the competitors is completely void and may cause harm business, the competitors can be operating at a loss or there might be different cost strategies are used to which the certain business is not aware of. If the prices are lower than you have room for raising, but if the prices are relatively higher then review is necessary of the cost strategies. Choosing to offer discounts only to compete with the market is another difficulty that may cause in setting the right prices as the effects of discounting I much higher on the profits; for instance; if your gains on services is 20% and your discount is 10% you need to trade, more of the services to compete, still if there is a need to come at the top of the trade, average returns must be calculated. Most of the pricing policies are made excluding the value added tax, once the prices are set and when the value added tax the cost is not recovered, the sum that is received net of the value added tax must restore your direct costs and add to fixed costs. If the services offered are an alternate to the competitors than the pricing policies must be given strong consideration and reviews, if the services are tending to be a step better than that of the competitors, charging a higher price is appropriate for the customer require higher quality standards and better customer care, another important thing while reviewing the competitors they must be presented outside of the certain region.


The major problem in the application of performance appraisal of the sector is the maintaining equality in the performance judgement, as with the service sector the employees are the real assets that help in revenue generation and the evaluation of the human resource inaccurately might cause displeasure and complaints with the certain trade and commerce.

Since the people who are responsible for evaluation are not enough educated and do not posses such expertise, they often take decisions that result in discord, inequality and lost trust among the human assets of the service sector, there might also be the problems of subjectiveness while making the performance appraisal, though it is clearly stated in written form that being unbiased and even handed is the most critical requirement while making performance appraisal, though while evaluating performance the raters show subjectivity, hence eliminating the goal of performance appraisal. Favors being part of an organization also creates displeasure and lack motivation for the human asset, a minimal no. of workers get rewards that may exist in vertical structure or a diagonal structure, even the workers who even put all their efforts do not get the due rewards because of the favors. The certain practices bring lack of motivation, absenteeism, poor self recognition and disloyalty towards the certain business.

Another barrier in evaluation of the human assets is a bundle of verbal disapproval and so much interference of other workers and related parties. Hence there are no f problems that arise such as evaluators lack of knowledge and skills, the ability to judge, fairness and precision of the whole organizational structure, favors of a certain staff and other aspects.

Cost volume profit also called CVP analysis is a framework to measure the nature of the net earnings in response to the alteration in total revenues, entire costs or both, as the trade is done in a complex procedure and the CVP approach helps to simplify using the elements and considerations that focuses on relevant relations. Cost volume profit is utilized in the service sector in order to recognize the prices and the cost volume of the services (Yuan, 2009). The costs incurred are considered as fixed costs and variable costs, the cost behavior exhibits a linear relationship with the X axis when plotted a graph, the revenues and cost are calculated with respect to the concept of time value of money.

The method of analyzing the difference of real cost and options used in the trade and commerce activity is known as the incremental analysis that facilitates planning and overseeing the business activities, other name for incremental cost is a relevant cost approach, marginal determination or differential determination, however, incremental analysis do not calculate any sinking cost, this method is highly beneficial in the making of strategic decisions either self-generated trade or outsourced. It helps with dispute resolution that is based on the accounting knowledge to help in future planning regarding the revenues earned but the application is possible when more than one option is presented. The analysis guides the business to take action regarding the acceptability of a new business. The certain business is usually lesser than the typical selling price, it also aids in achieving efficiency and cost allocation of confined resources to a large production line, the analysis help the top line managers take decisions for the goods and services or utilization of human asset.


Yuan, F. C. (2009). The use of a fuzzy logic-based system in cost-volume-profit analysis under uncertainty. Expert Systems with Applications, 36(2), 1155-1163. Data retrieved from

Bei, L.T. and Chiao, Y.C., 2006. The determinants of customer loyalty: an analysis of intangible factors in three service industries. International Journal of Commerce and Management, 16(3/4), pp.162-177. Data retrieved from

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