Cost Definitions Luisa Giovanni is a student at New York University. To help pay her way through college, Luisa started a dog walking service. She has 12 client dogs—six are walked on the first shift (6:30 A.M. and 5:00 P.M.), and six are walked on the second shift (7:30 A.M. and 6:00 P.M.). Last month, Luisa noted the following:
1. Purchase of three leashes at $10 each (she carries these with her in case a leash breaks during a walk). 2. Internet service cost of $40 a month. This enables her to keep in touch with the owners, bill them by email, and so on.
3. Dog treats of $50 to reward each dog at the end of each walk.
4. A heavy-duty raincoat and hat for $100.
5. Partway through the month, Luisa’s friend, Jason, offered her a chance to play a bit role in a movie that was shooting on location in New York City. The job paid $100 and would have required Luisa to be on location at 6:00 A.M. and to remain for 12 hours. Regretfully, Luisa turned it down.
6. The dog owners pay Luisa $250 per month per dog for her services.
1. At the end of the month, how would Luisa classify her Internet payment of $40—as a cost on the balance sheet or as an expense on the income statement?
2. Conceptual Connection: Which of the above item is an opportunity cost? Why?
3. What price is charged? What is Luisa’s total revenue for a month?