Large service organisations, such as banks and hospitals, used to be noted for their lack of stan- dard costing systems, and their relatively unsophis- ticated budgeting and control systems compared with large manufacturing organisations. But this is changing and many large service organisations are now revising their use of management accounting techniques.

Requirements:

(a) Explain which features of large-scale service organisations encourage the application of activity-based approaches to the analysis of cost information. (6 marks)

(b) Explain which features of service organisa- tions may create problems for the application of activity-based costing. (4 marks)

(c) Explain the uses for activity-based cost infor- mation in service industries. (4 marks)

(d) Many large service organisations were at one time state-owned, but have been privatised. Examples in some countries include electri- city supply and telecommunications. They are often regulated. Similar systems of regulation of prices by an independent authority exist in many countries, and are designed to act as a surrogate for market competition in industries where it is difficult to ensure a genuinely competitive market. Explain which aspects of cost information and systems in service organisations would particularly interest a regulator, and why these features would be of interest. (6 marks) (Total 20 marks) CIMA