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Chapter 16: Q23E_1 (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—Equipment 55

Requirements 1. What is Buddy’s operating income for April?

Short Answer

Expert verified

The net operating income for the month of April is $9,304.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of Income Statement

The income statement is defined as the financial statement which shows the revenues and expenses of a business incurred during the year.

02

Preparation of income statement


Income Statement

Amount ($)

Amount ($)

Revenue

Service Revenue

$16,300

Expenses

Building Rent Expense

$900

Depreciation Expense - Equipment

$55

Grooming Supplies Expense

$1,675

Utilities Expense

$305

Wages Expense

$4,061

Total Expense

$6,996

Operating income

$9,304

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Most popular questions from this chapter

What are product costs?

Understanding today’s business environment

Match the following terms to the appropriate statement. Some terms may be used more than once, and some terms may not be used at all.

E-commerce Just-in-time management (JIT)

Enterprise resource planning (ERP) Total quality management (TQM)

a. A management system that focuses on maintaining lean inventories while producing products as needed by the customer.

b. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services while meeting organizational objectives.

c. Integrates all of a company’s functions, departments, and data into a single system.

d. Adopted by firms to conduct business on the Internet

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’s 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 2. Would you change your answer if Sue Peters was the one recently hired as controller and Dale Miller was a well-liked, long time employee who indicated he always eventually repaid the fund?

Match the definition to the key term.

13. Triple bottom line

14. Value chain

15. Just-in-time management

16. Enterprise resource planning

17. Total quality management

a. A cost management system in which a company produces products just in time to satisfy needs.

b. A philosophy designed to integrate all organizational areas in order to provide customers with superior products and services, while meeting organizational goals throughout the value chain.

c. Software system that can integrate all of a company’s functions, departments, and data into a single system.

d. Evaluating a company’s performance by its economic (profits), social (people), and environmental (planet) impact.

e. Includes all activities that add value to a company’s products and services

Describe a service company, and give an example.
See all solutions

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