Q19RQ - Horngren'S Financial And Managerial Accounting

Question

How does a service company calculate unit cost per service?

Step-by-Step Solution

Answer

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

Step 1: Definition of service company

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

Step 2: 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.