Advanced Large service organisations, such as banks and hospitals, used to be noted for their lack of
Question:
Advanced 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.
(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.
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