Explain the uses for activity-based cost information in service industries.

Large organisation that are of a service nature such as banks and hospitals used to be noted for their lack of standard costing systems and their relatively unsophisticated budgeting and control systems compared with large manufacturing organisation. But this is changing and many large service organisations are revising their use of management accounting techniques.

Required:

a) Explain which features of large-scale service organisations encourage the application of Activity Based approaches to the analysis of cost information.

b) Explain which features of service organisations may create problems for the application of Activity Based Costing.

c) Explain the uses for activity-based cost information in service industries.

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