Service firms use cost data in much the same way that manufacturing firms do. They use costs to determine profitability, the feasibility of introducing new services, and so on. However, because service firms do not produce physical products, they do not need to value work-in-process and finished goods inventories. Of course, they may have supplies, and the inventory of supplies is simply valued at historical cost.
Nonprofit firms must track costs to be sure that provide their services in a cost-efficient way. Governmental agencies have a fiduciary responsibility to taxpayers to use funds wisely. This requires accurate accounting for costs.