Page 149 - BA2 Integrated Workbook - Student 2017
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Performance measurement
5.2 Suitable cost units
In order to maintain effective cost control it is essential to establish a measurable
cost unit for which we can ascertain and monitor the costs.
In the cost identification and classification chapter we saw how composite cost
units are often used to monitor and control the costs in service operations. Any cost
unit can be used as long as it can be objectively measured and its cost can be
determined and compared from one period to another and if possible from one
organisation to another.
Examples of composite cost units that could be used:
Hotel — bed-night or room-night
Hospital — in-patient day
Haulage contractor — tonne-kilometre
Once a suitable cost unit has been agreed, it can be calculated as:
Total cost incurred in period
Average cost per units of service = ——————————————————
Units of service supplied in the period
TYU 4
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