Service firms sell time and skill all costs are

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Service FirmsSell time and skillAll costs are period costsOn the income statement:Revenue – Expenses = Income
XYZ Service, Inc.Example: Preparing an income statement for XYZ Service, Inc.Data for January, 2015:Service revenue = $20,450Selling & admin. expenses = $16,950
XYZ Service, Inc.
XYZ Service, Inc.Finding the cost per unit of serviceIf XYZ provided 1,000 units of service during January:
Merchandising FirmsResell goods purchased from supplierPeriod costsProduct costs
Merchandising FirmsBasic inventory formulaBeginning merchandise inventory+ PurchasesCost of goods available for sale- Ending merchandise inventoryCost of goods soldMerchandise BB + Purchases = COGASCOGAS – Merchandise EB = COGS
Merchandising FirmsOn the income statement:Sales revenue – COGS = Gross profitGross profit – operating expenses = operating income
XYZ Merchandising, Inc.Example: Preparing an income statement for XYZ MerchandisingData for January 2015:Sales revenue = $20,450Selling & admin. expenses = $3,850Merchandise on December 31, 2014 = $420Purchases in January = $13,610Merchandise on January 31, 2015 = $930
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XYZ Merchandising, Inc.On the balance sheet:CashXXXAccounts receivableXXXEquipmentXXXTotal assetsXXX
XYZ Merchandising, Inc.Merchandise BB+      PurchasesCOGASIncome StatementCOGSBalance SheetMerchandise EB
XYZ Merchandising, Inc.

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