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Chapter 16: Q19RQ (page 885)

How does a service company calculate unit cost per service?

Short Answer

Expert verified

The cost per service is computed by dividing the total number of services produced by total costs.

Step by step solution

01

Definition of service company

A service company is defined as a company that provides service to clients or customers.

02

Computation of cost per service

The service company can calculate the cost per service by considering all the operating expenses. The cost per service is computed by the formulae in which total costs are divided by the total number of services.

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Most popular questions from this chapter

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f. Cost of TV ads.

Comparing managerial accounting and financial accounting

For each of the following, indicate whether the statement relates to managerial accounting (MA) or financial accounting (FA):

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Question:Preparing an income statement and calculating unit cost for a service company

The Windshield Doctors repair chips in car windshields. The company incurred the following operating costs for the month of March 2018:

Salaries and wages \( 12,000

Windshield repair materials 4,600

Depreciation on truck 300

Depreciation on building and equipment 1,200

Supplies used 300

Utilities 460

The Windshield Doctors earned \)23,000 in service revenues for the month of March by repairing 500 windshields. All costs shown are considered to be directly related to the repair service.

Requirements

1. Prepare an income statement for the month of March.

2. Compute the cost per unit of repairing one windshield.

3. The manager of Windshield Doctors must keep unit operating cost below $50 per windshield in order to get his bonus. Did he meet the goal?
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