Question

Distinguish between product costing and service costing.

Answer 1

Costs involved in the manufacture of products are called product costing and costs involved in providing a service is call service costs. The main difference between the product costing and service costing is that the cost of raw materials, work-in process, finished goods, labor and other manufacturing overheads etc. are part of product costing and these costs are mandatory to make a product but all these costs are not involved while providing services as only costs of labor and manufacturing overheads along with training to labor etc. are part of service costs.

Profits are generated by selling the products that were manufactured more than the cost of such products and profits are generated by providing the services who are in need at a price more than the cost incurred to provide that service. These are the main distinguish between product costing and service costing.