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A service department is usually associated with a manufacturer. A service department is part of the factory operations, but does not produce the factory's output. Rather, it provides services to the factory's production departments. Some examples of service departments include the factory maintenance department, quality control, factory information technology departments, and the purchasing department. The head of each service department is held responsible for the costs incurred in his or her service department. In traditional cost accounting each service department's costs are then allocated to the production departments. The service departments' costs become a production department's indirect factory overhead which is then allocated to the output of each production department. The various methods of allocating service departments' costs are covered in cost accounting textbooks.
Service department is not engaged directly in the production of the product like the support services departmnts.
Services dept is the dept that assists in production. Quality control dept would be a services dept.
When Accounting and Finance Services company is taken up, Travel and Ticket booking, liasin work with clients can be considered service departments.HR, their own Accounts departments are staff departments.
No gain. Only losses
The main issure in regard to the Service department, is how to allocate the cost related to the product.
The cost allocation will affect many aspects in the organisation, for example Product Pricing, Interdepartment pricing, Responsibility centers and Manager compensation.
Cost driver for service department used for cost allocation vary, Ex Space used by service Dep., Power usage, etc.
A service department is a cost that provides services to the rest of a company. The manager of a service department is responsible for keeping costs down, or meeting the costs stated in a budget. The services provided by a service department are then allocated to the other departments of a business that use these services
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