Question

What costs will be the cost of good sold for car rental service business?

Answer 1

Cost of goods sold for car rental service business are as follows-

A. Since this is a service industry then, the cost of payments to the casual workers would be treated as cost of goods sold because this is a direct labour cost.

B. Payments which are made to the owner of the car will be treated as direct cost which are related to the cost of good sold.

C. Cost of repairs and maintenance are also to be charged as cost of goods sold.

D. Any kind of routine expenditure which are incurred i n nature of material cost will be treated as direct material cost.

This is a service industry and this is related with acting as a third party between the the car owner and the car user and charging a commission for acting as an intermediary between them so this will be having lesser operational cost involved with its business.