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20.9 Luxembourg Service Company Job Costing

Luxembourg Service Industry​

Luxembourg has a significant service sector, including:

  • Financial services
  • Consulting
  • Legal services
  • Accounting services
  • IT services
  • Marketing and advertising
  • Event planning
  • Catering

Service Company Job Costing Example​

Luxembourg Consulting Firm - Client Project:

Job #501: IT Consulting for Luxembourg Bank

Direct Materials:

  • Software licenses: €2,000
  • Hardware (temporary): €1,500
  • Travel expenses: €800
  • Total: €3,300

Direct Labor:

  • Senior consultant: 60 hours × €120/hour = €7,200
  • Consultant: 80 hours × €90/hour = €7,200
  • Junior consultant: 40 hours × €60/hour = €2,400
  • Total: €16,800

Applied Overhead (35% of direct labor):

  • Office rent allocation: €2,000
  • Support staff: €1,500
  • Utilities and other: €1,380
  • Total Applied: €5,880 (or 35% of €16,800)

Total Job Cost:

  • Direct materials: €3,300
  • Direct labor: €16,800
  • Applied overhead: €5,880
  • Total: €26,000

Billing:

  • Billable hours: 180 hours
  • Average rate: €180/hour
  • Total billing: €32,400 (excluding VAT)
  • VAT (17%): €5,508
  • Total with VAT: €37,908

Profitability:

  • Revenue: €32,400
  • Job cost: €26,000
  • Gross profit: €6,400
  • Profit margin: 19.8%

Luxembourg-Specific Considerations​

Multilingual Services​

Job #502: Multilingual Marketing Campaign

Direct Labor:

  • French copywriter: 20 hours × €80/hour = €1,600
  • German copywriter: 20 hours × €80/hour = €1,600
  • English copywriter: 15 hours × €80/hour = €1,200
  • Project manager: 10 hours × €100/hour = €1,000
  • Total: €5,400

Direct Materials:

  • Design software: €500
  • Stock images: €300
  • Printing (samples): €200
  • Total: €1,000

Applied Overhead:

  • €5,400 × 30% = €1,620

Total Job Cost: €8,020

Cross-Border Considerations​

Luxembourg service companies often serve clients in multiple countries:

Job #503: Cross-Border Tax Consulting

Direct Labor:

  • Tax expert (Luxembourg): 30 hours × €150/hour = €4,500
  • Tax expert (Belgium): 20 hours × €140/hour = €2,800
  • Total: €7,300

Direct Materials:

  • Research services: €1,000
  • Travel (cross-border): €600
  • Total: €1,600

Applied Overhead:

  • €7,300 × 25% = €1,825

Total Job Cost: €10,725

Service Company PCN Accounts​

Luxembourg PCN for Services:

Work in Process:

  • 310000: Work in Process (services in progress)

Cost of Services:

  • 604000: Cost of Services (Coût des Prestations)

Service Revenue:

  • 700000: Service Revenue (Prestations de Services)

Overhead:

  • 610000-619999: Operating Expenses (can be allocated as overhead)

Luxembourg Compliance Note​

For Luxembourg service companies:

  • Job costing helps with client profitability
  • Track costs by client/project
  • Consider VAT on services (usually 17%)
  • Cross-border services may have different VAT rules
  • Use appropriate PCN accounts
  • Maintain job cost records
  • Support pricing decisions

Think It Through​

How does job order costing help a Luxembourg service company manage its business? What unique challenges do service companies face in job costing?