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Chapter 16: Q20RQ (page 885)
How does a merchandising company calculate unit cost per item?
The merchandising company calculates the unit cost per item by calculating a total number of items sold from the total cost of goods sold.
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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—Equipment 55
Requirements 2. What is the cost of service to groom one dog?
How do period costs differ from product costs?
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—Equipment 55
Requirements 1. What is Buddy’s operating income for April?
Identify the following characteristics as primarily related to financial accounting (FA) or managerial accounting (MA):
2. Helps in planning and controlling operations.
Classifying costs Wheels, Inc. manufactures wheels for bicycles, tricycles, and scooters. For each cost given below, determine if the cost is a product cost or a period cost. If the cost is a product cost, further determine if the cost is direct materials (DM), direct labor (DL), or manufacturing overhead (MOH) and then determine if the product cost is a prime cost, conversion cost, or both. If the cost is a period cost, further determine if the cost is a selling expense or administrative expense (Admin). Cost (a) is answered as a guide
Cost Product Period
DM DL MOH Prime Conversion Selling Admin.
a. Metal used for rims
b. Sales salaries
c. Rent on factory
d. Wages of assembly workers
e. Salary of production supervisor
f. Depreciation on office equipment
g. Salary of CEO
h. Delivery expense
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