From the course: Accounting Foundations: Managerial Accounting
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Cost flows in service firms
From the course: Accounting Foundations: Managerial Accounting
Cost flows in service firms
- While we have defined and discussed the nature of manufacturing businesses, an increasingly important type of business in the United States is the service sector. What is a service business? Well, a service business is any organization whose main economic activity involves producing a nonphysical product that provides value to a customer. It is important to understand how costs are accounted for in a service industry, because these types of businesses are the largest and fastest growing sector in our economy. Service companies actually share a lot of similarities with manufacturing companies. Like manufacturers, most service companies perform a significant number of activities to prepare their service products for sale and delivery to their customers. Typically, a lot of direct labor and overhead is involved in a service business. Service work is a very real production activity. However, what services firms provide is…
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