Question

Unit Cost, No Work-In-Process Inventories

Lising Therapy has a physical therapist who performs electro-mechanical treatments for its patients. During April, Lising had the following cost and output information:

Direct materials	$600
Hygienist's salary	$4,200
Overhead	$4,000
Number of treatments	100

Required:

1. Calculate the cost per treatment for April.
$___ per treatment

2. Calculate the cost of services sold for April.
$__

3. What if Lising found a way to reduce overhead costs by 20 percent? How would this affect the profit per treatment?
Profit would be increased  by $ __per treatment

Answer 1

1.

Direct materials	$600
Hygienist's salary	$4,200
Overhead	$4,000
Total cost	$8,800

Number of treatments = 100

cost per treatment for April = Total cost/Number of treatments

= 8800/100

= $88

2.

Cost of services sold for April = $8,800

3.

Reduction in overhead costs = 20 percent

= 4,000 x 20%

= $800

Reduction in overhead costs per treatment = 800/100

= $8

Profit would be increased  by $8 per treatment

Kindly give a positive rating if you are satisfied with the answer. Feel free to ask if you have any doubt. Thanks.