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How to calculate the cost-effectiveness of services

How to calculate the cost-effectiveness of services

Service margin indicates how efficiently the company operates, whether it makes a profit if its costs are covered.

This relative indicator is most often expressed as a percentage.



Before calculations, refer to the№2 form of financial statements (profit and loss statement). Identify all cost items that affect the formation of the cost of services, not taking into account the balance.


Calculate the Return of Service (PN) through profit or loss ratio from services (or Proulx Uru) to the sum of all costs of services sold (LRU). Transparent formula for calculation is as follows:
PN = Pru / ISG, or PN = Ur / LRU, if the result of the sale of services formed a loss.


To determine the index, calculate the costcost of services. To do this, add the cost of services sold, selling and administrative expenses. And as the indicator of profitability is relative, multiply it by 100%.


The indicator characterizes the profit marginsorganization obtained with each monetary unit spent to the production services. If necessary, you can calculate the margin and across the enterprise, and for each service separately.


With the calculation of the profitability of the services you can easilydetermine what services bring more profit, and whether there is an opportunity to reduce the cost of any other services. Calculate profitability of the planned services if the organization is going to implement a new service.

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