Service industries

Definition

Service industries are sectors of the economy that provide intangible goods and services to consumers or businesses. These industries include healthcare, education, finance, and professional services among others.

5 Must Know Facts For Your Next Test

1. Service industries use job order costing to track expenses for individual client projects or jobs.
2. In nonmanufacturing environments like consulting firms, each client project is treated as a separate job unit.
3. Direct costs in service industries often include labor and any materials specific to a particular job.
4. Overhead costs in service industries can include administrative expenses and utilities.
5. The completion of a job results in billing the client for the accumulated costs plus profit margin.

Review Questions

• What types of costs are tracked using job order costing in service industries?
• How do service industries classify direct and indirect costs within a job order cost system?
• Why is it important for service industries to use job order costing?

Related terms

Job Order Costing:

A system for assigning manufacturing costs to an individual product or batches of products.

Direct Costs:

Expenses that can be directly traced to a specific job or project.

Overhead Costs:

Indirect expenses related to the general operations of a business that cannot be directly traced to a single job.