Identify the characteristics of services: I. Intangibility: They do not have a physical substance unlike goods. They cannot be held or seen. II. Inseparability: Consumption and creation of a service cannot be separated. Services are consumed as they are created. III. Variability: Services face the problem of maintaining consistency in the standard of output. IV. Perishability: Services cannot be stored. V. Lack of ownership: Services do not result in the transfer of property in anything.

Related MCQs

• Overhead is the cost incurred in the course of making a product, providing a service or running a department, but which cannot be traced directly and in full to the product, service or department.
• Process costing provides a system of costing where the following characteristics occur. Identify which of the following are correct:
• Which of the following procedure is incorrect for attributing overhead costs to cost units? I. Collecting production overhead costs by item II. Establishing cost centres III. Allocating and apportioning overhead costs to cost centres IV. Apportioning service cost centre costs to production cost centres V. Absorbing production cost centre costs into cost units
• The apportionment of production overhead costs might be in two stages: • sharing (or dividing) general costs between production centres and service centres; and • then sharing the costs of the service centres between the production centres.
• Process costing is used when output is produced in a continuous process system, and it is difficult to separate individual units of output.
• . Production Overheads are costs related to the production process other than direct labour and materials. They are also known as factory overheads since they are incurred inside the factory, other overheads such as selling and administrative overheads are always charged to in the period in which they are incurred
• The normal loss is something that is unavoidable in order to get the good output. The cost of the lost units is part of the cost of obtaining the good output.
• A situation may arise where both service departments do work for the other service department, as well as the production departments. The secondary apportionment is more complex. The process is called reciprocal apportionment
• A blanket overhead absorption rate is an absorption rate used throughout a factory and for all jobs and units of output irrespective of the department in which they were produced.
• Administration overheads and sales and distribution overheads are not absorbed into product costs. Instead, they are treated in full as an expense in the financial period to which they relate.