Question

Schatzie’s is a veterinary clinic. At the beginning of July, the clinic had $720 of veterinary supplies on hand. The following information is available for July 2009. Salaries for veterinary staff.............................................. $32,000 Salaries for veterinary assistants....................................... 12,000 Salary for receptionist..................................................... 2,500 Wages for office workers.............................................. 6,000 Veterinary supplies purchased in July............................ 9,600 Veterinary supplies on hand on July 31............................. 1,150 Depreciation on hospital and lab equipment........................ 8,600 Depreciation on office equipment...................................... 3,000 Building rent (60% related to treatment) .............................. 3,600 Utilities (80% related to treatment) .......................................... 1,800 Required: (a) What is the overhead amount related to the cost of services rendered? (b) Compute Cost of Services Rendered. (c) Schatzie’s collected $88,000 in treatment fees. What was Schatzie’s gross profit and net income? (Hint: Gross profit is revenues minus cost of services provided.)

Answer 1

a) Overhead is $12,200 as follows:

Overhead (total of 3 items below)		12,200
Depreciation on hospital and lab equipment		8,600
60% of Building rent		2,160
80% of Utilities		1,440

b) Cost of Services is $65,370 (pls see table below)

c) Gross profit is $22,630 and Net Income is $9,330 (pls see table below)

	Revenue	Cost
Treatment fee	88,000
Salaries for veterinary staff		32,000
Salaries for veterinary assistants		12,000
Veterinary supplies consumed		9,170
Overhead (total of 3 items below)		12,200
Depreciation on hospital and lab equipment		8,600
60% of Building rent		2,160
80% of Utilities		1,440
Cost of services (total from salaries to overheads)		65,370
Gross profit		22,630
Other expenses: (total fo 5 items below)		13,300
Salary for receptionist		2,500
Wages for office workers		6,000
Depreciation on office equipment		3,000
40% of Building rent		1,440
20% of Utilities		360
Net income (Gross profit - Other expenses)		9,330