Question 10.RQ.1.1: State which of the following are characteristics of manageri...
State which of the following are characteristics of managerial reports prepared in a service organisation:
(i) a low incidence of work in progress at the end of a period
(ii) the use of composite cost units
(iii) the use of equivalent units
(A) (i) only
(B) (i) and (ii) only
(C) (ii) only
(D) (i), (ii) and (iii)
(B)
Many services are consumed as soon as they are made available to the customer. They cannot be held in inventory for sale at a later date. Therefore there is a low incidence of work in progress at the end of a period. Composite cost units are often used because they are more useful for control purposes, for example in a haulage company a cost per tonne mile might be more useful for planning and control purposes than a simple cost per tonne. Equivalent units are more likely to be used in process costing.