Q12SE - Horngren'S Financial And Managerial Accounting

Question

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?

Step-by-Step Solution

Answer

The cost to service to provide one haircut is $9.2

Step 1: Computation of total cost

$\begin{array}{c}\mathrm{Total} \mathrm{Cost}=\mathrm{Wages}+\mathrm{Hair} \mathrm{Supplies}+\mathrm{Utilities} \mathrm{expense}+\mathrm{Depreciation} \mathrm{expense}\\ =\mathrm{\$}548+\mathrm{\$}950+\mathrm{\$}190+\mathrm{\$}60\\ =\mathrm{\$}1,748\end{array}$

Step 2: Computation of Cost to service to provide one haircut

$\begin{array}{c}\mathrm{Cost} \mathrm{to} \mathrm{service} \mathrm{to} \mathrm{provide} \mathrm{one} \mathrm{haircut}=\frac{\mathrm{Total} \mathrm{cost}}{\mathrm{Total} \mathrm{number} \mathrm{of} \mathrm{units}}\\ =\frac{\mathrm{\$}1,748}{190}\\ =\mathrm{\$}9.2\end{array}$