Question

Which do you think will be easier to predict: product costs or service costs? Please justify your response.

Answer 1

Product cost is compraratively easier to predict as compared to service costs. As we know " product cost" refer to the costs which are incurred to create the product.these costs include direct labour, direct material,consumables items, factory overheads. At a later stage, product cost can also be termed as cost of goods sold which includes expenses which has been incurred to sell the products such as showroom expense ans staff salary ) selling and administration expense).

on the other hand, Service cost means the cost which is incurred to execute or perform a vauable task by hiring another person which may require professional skill or expertise. so while determining service cost major factor is the availabilty of the person who can perform such a task.further, while providing service it is very difficult to estimate the exact working hours required to fulfill the task.

when we compared product cost with service cost, product cost can be calculated beacuse we have a clear knowledge about the material its avaiablty , labour and its time required to produce that particular product. production cost is wider because production is done at a large scale so we can estimate the overall cost but on the other hand service is doing a particular task , sometimes which a person has never done before so he/she cannot give exact calculation about the cost.

so it is comparatively easier to calculate product cost rather than service cost.