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Chapter 16: Q23E_2 (page 892)

Calculating income and cost per service for a service company

Buddy Grooming provides grooming services for pets. In April, the company earned \(16,300 in revenues and incurred the following operating costs to groom 660 dogs:

Wages Expense \) 4,061

Grooming Supplies Expense 1,675

Building Rent Expense 900

Utilities Expense 305

Depreciation Expense鈥擡quipment 55

Requirements 2. What is the cost of service to groom one dog?

Short Answer

Expert verified

The cost of service to groom one dog will be $10.6.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of Wages Expense

The wages expense is defined as the expense incurred by the business on paying the employees of the company.

02

Computation of Cost of service to groom one dog

CostofServicetogroomonedog=TotalExpenseNumberofservicesprovided=$6,996660=$10.6

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Most popular questions from this chapter

Becky Knauer recently resigned from her position as controller for Shamalay Automotive, a small, struggling foreign car dealer in Upper Saddle River, New Jersey. Becky has just started a new job as controller for Mueller Imports, a much larger dealer for the same car manufacturer. Demand for this particular make of car is exploding, and the manufacturer cannot produce enough to satisfy demand. The manufacturer鈥檚 regional sales managers are each given a certain number of cars. Each sales manager then decides how to divide the cars among the independently owned dealerships in the region. Because of high demand for these cars, dealerships all want to receive as many cars as they can from the regional sales manager.

Becky鈥檚 former employer, Shamalay Automotive, receives only about 25 cars each month. Consequently, Shamalay is not very profitable.

Becky is surprised to learn that her new employer, Mueller Imports, receives more than 200 cars each month. Becky soon gets another surprise. Every couple of months, a local jeweler bills the dealer $5,000 for 鈥渕iscellaneous services.鈥� Franz Mueller, the owner of the dealership, personally approves payment of these invoices, noting that each invoice is a 鈥渟elling expense.鈥� From casual conversations with a salesperson, Becky learns that Mueller frequently gives Rolex watches to the manufacturer鈥檚 regional sales manager and other sales executives. Before talking to anyone about this, Becky decides to work through her ethical dilemma. Put yourself in Becky鈥檚 place.

Requirements

1. What is the ethical issue?

2. What are your options?

3. What are the possible consequences?

4. What should you do?

How is cost of goods manufactured calculated?

Question:Calculating income and cost per unit for a merchandising company

Conway Brush Company sells standard hair brushes. The following information summarizes Conway鈥檚 operating activities for 2018:

Selling and Administrative Expenses $ 47,058

Purchases 85,800

Net Sales Revenue 151,800

Merchandise Inventory, January 1, 2018 7,920

Merchandise Inventory, December 31, 2018 11,748

Requirements

1. Calculate the operating income for 2018.

2. Conway sold 6,600 brushes in 2018. Compute the unit cost for one brush.

Making ethical decisions

Sue Peters is the controller at Vroom, a car dealership. Dale Miller recently has been hired as the bookkeeper. Dale wanted to attend a class in Excel spreadsheets, so Sue temporarily took over Dale鈥檚 duties, including overseeing a fund used for gas purchases before test drives. Sue found a shortage in the fund and confronted Dale when he returned to work. Dale admitted that he occasionally uses the fund to pay for his own gas. Sue estimated the shortage at $450.

Requirements 1. What should Sue Peters do?

Selected data for three companies are given below. All inventory amounts are ending balances and all amounts are in millions.

Company A Company B Company C

Cash \( 6 Wages Expense \) 12 Administrative Expenses $ 4

Net Sales Revenue 48 Equipment 32 Cash 25

Finished Goods Inventory 10 Accounts Receivable 8 Net Sales Revenue 75

Cost of Goods Sold 23 Service Revenue 65 Selling Expenses 8

Selling Expenses 4 Cash 34 Merchandise Inventory 12

Equipment 67 Rent Expense 12 Equipment 55

Work-in-Process Inventory 9 Accounts Receivable 19

Accounts Receivable 14 Cost of Goods Sold 25

Cost of Goods Manufactured 23

Administrative Expenses 7

Raw Materials Inventory 6

Using the data on the previous page, calculate total current assets for each company
See all solutions

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