Why targeting costing is difficult to implement in service organisations?

Query:

Why targeting costing is difficult to implement in service organisations? 

Solution:

Because services are different in nature such as banking, transport parcel delivery, energy, supply, entertainment, education, hotels, car repair and so on.

A feature of labour content may be high in the service industry but as per material content it is often very low.

Following can be difficulties to implement target costing in the service organisations as below:

• Lack of substance due to its nature of intangibility. There is no material substance or physical aspect in the services. For example, No taste, no visible presence of the substance and so on. When services are provided by a human it is not possible to reduce cost to a targeted level by reducing material cost.
• Many services are created at the same time as they are consumed such as thinking of medical treatment as there is no service exists until it is actually being experienced.
• Services are naturally perishable. Such as The service of a hair treatment is purchased for a particular period of time.
• There is no transfer of ownership in the business services. It does not result in the transfer of property or ownership.