PROFESSIONAL POOL CLEANING SERVICE Income Statement For the Month Ended July 31, 2018 Birman Meech $ 3,000 Frond Total Service Revenue $ 3,500 $2,000 $ 2,000 $8,500 Variable Costs 1,500 2,450 1,200 5,150 Contribution Margin 1,500 1,050 800 3,350 Fixed Costs 3,000 Operating Income $ 350
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Using variable costing, service company
Professional Pool Cleaning Service provides pool cleaning services to residential customers. The company has three employees, each assigned to specific customers. The company considers each employees territory as a business segment. The company incurs variable costs that include the employees’ Wages, pool chemicals, and gas for the service vans. Fixed costs include depreciation on the service vans. Following is the income statement for the month of July:
Requirements
- Calculate the contribution margin ratio for each business segment.
- The business segments had the following numbers of customers: Birman, 60; Meech, 70; and Frond, 40. Compute the service revenue per customer, variable cost per customer, and contribution margin per customer for each business segment.
- Which business segment was most profitable? List some possible reasons why this segment was most profitable. How might the various reasons affect the company in the long term?
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