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Chapter 16: 16RQ (page 884)
Describe a service company, and give an example.
Service company provides services to customers, examples are American express, hospitals, etc.
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Preparing a schedule of cost of goods manufactured Wilson Corp., a lamp manufacturer, provided the following information for the year ended December 31, 2018:
Balances: Beginning Ending
Direct Materials \( 59,000 \) 23,000
Work-in-Process Inventory 109,000 62,000
Finished Goods Inventory 41,000 44,000
Other information:
Depreciation, plant building and equipment $ 16,000
Direct materials purchases 151,000
Insurance on plant 24,000
Sales salaries 47,000
Repairs and maintenance—plant 10,000
Indirect labor 39,000
Direct labor 121,000
Administrative expenses 60,000
Requirements 1. Use the information to prepare a schedule of the cost of goods manufactured.
Calculating unit cost per service
Marx and Tyler provides hair-cutting services in the local community. In February, the business cut the hair of 190 clients, earned \(4,800 in revenues, and incurred the following operating costs:
Hair Supplies Expense \) 950
Wages Expense 548
Utilities Expense 190
Depreciation Expense—Equipment 60
What was the cost of service to provide one haircut?
Computing cost of goods sold, manufacturing company
Use the following information to calculate the cost of goods sold for The Ellis Company for the month of June:
Finished Goods Inventory:
Beginning Balance $ 30,000
Ending Balance 10,000
Cost of Goods Manufactured 165,000
Preparing an income statement and calculating unit cost for a service company
The Glass Doctors repair chips in car windshields. The company incurred the following operating costs for the month of July 2018:
Salaries and wages \( 10,000
Windshield repair materials 4,100
Depreciation on truck 500
Depreciation on building and equipment 900
Supplies used 450
Utilities 4,550
The Glass Doctors earned \)25,000 in service revenues for the month of July by repairing 250 windshields. All costs shown are considered to be directly related to the repair service.
Requirements
1. Prepare an income statement for the month of July.
2. Compute the cost per unit of repairing one windshield, rounded to the nearest cent.
3. The manager of The Glass Doctors must keep unit operating cost below $80 per windshield in order to get his bonus. Did he meet the goal?
Identifying product costs and period costs Classify each cost of a paper manufacturer as either a product cost or a period cost:
f. Cost of TV ads.
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