What are internal Service Departments

What are internal Service Departments

The internal service department does not directly participate in the production process but provide vital support to the production department. for example maintenance department. The cost of internal service department is apportioned to the production department.

Job costing for Internal Service Department

Job costing may be used to charge the service department cost on to the user department on the bases of usage of service instead of apportionment of total cost to different production department.

Advantages of Internal Job Costing

1.Rational

Expenses charges on the bases of utilization is a rational way of apportionment.

2. Careful utilization

user department will exercise care for using the service department as expenses are being charged and monitored by the management. This serve as important cost control tool.

3. Service Department Efficiency

Service is being charged to the department therefore the department will require more quality and efficient services from the service department and this would automatically improve the service quality level of the service department.