Service

Definition

Service refers to intangible activities or benefits provided by one party to another, often involving expertise or labor. Unlike goods, services do not result in ownership of anything tangible.

5 Must Know Facts For Your Next Test

1. Service organizations primarily provide intangible products rather than physical goods.
2. Examples of service organizations include consulting firms, healthcare providers, and educational institutions.
3. In managerial accounting, costs for service organizations are often categorized into direct labor, overhead, and administrative expenses.
4. Service organizations typically do not have inventory accounts like merchandising and manufacturing companies do.
5. Performance metrics for service organizations often focus on customer satisfaction, efficiency, and quality of service.

Review Questions

• What is the main difference between a service organization and a manufacturing organization?
• How are costs categorized in a service organization?
• Why don't service organizations maintain inventory accounts?

Related terms

Direct Labor:

The cost of wages for employees who are directly involved in providing a service.

Overhead:

Indirect costs associated with running an organization that cannot be directly tied to a specific product or service.

Customer Satisfaction: A measure of how products or services provided by an organization meet or exceed customer expectations.