Question

Jose runs a doggy daycare. They are working on their budget for the upcoming year. They are currently breaking out the service costs from the period costs. Why would this be an important step for Jose in the budgeting process?

Answer 1

Breaking out the service costs from the period costs is important for Jose in the budgeting process as it allows him to allocate his budget and make informed decisions about the financial health of his business.

Step-by-step explanation:

Breaking out the service costs from the period costs is an important step for Jose in the budgeting process because it allows him to have a clear understanding of the different types of expenses he has to deal with. Service costs are the costs directly related to providing the doggy daycare services, such as employee wages, food, and supplies. Period costs, on the other hand, are the costs that are not directly tied to the services provided, such as rent, utilities, and insurance. By separating these costs, Jose can more accurately allocate his budget and make informed decisions about pricing, profitability, and overall financial health of the business.