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3 years ago

Income Statement, Direct and Indirect Cost Concepts, Service Company

Business

1 answer:

Fofino [41]3 years ago

8 0

Answer:

Send It Packing

1. The cost of materials used for packaging and mailing services during May is $11,550.

2. The prime cost for May is $51,170 (direct materials and labor and direct overhead)

3. The conversion cost for May is $43,700 (labor and overhead)

4. The total cost of services for May is $55,250

5. Income Statement for the month of May

Service Revenues $102,100

Cost of services:

Cost of materials used $11,550

Cost direct labor used 25,570

Overhead incurred 18,130 $55,250

Gross profit $46,850

Franchise fee $5,105

Advertising expense 2,750

Administrative costs 3,650 $11,505

Net income $35,345

6. The overhead incurred has $14,050 direct and $4,080 indirect costs. The direct cost was paid to the courier companies for delivery services. The indirect costs were incurred for rent, utilities, and insurance.

Explanation:

a) Data and Calculations:

Beginning inventory of materials = $1,050

Purchases of materials = $11,450

Materials available for use = $12,500

Ending inventory of materials = $950

Cost of materials used = $11,550

Cost direct labor used = 25,570

Overhead incurred = 18,130

Franchise fee (5% of $102,100) 5,105

Advertising expense = 2,750

Administrative costs 3,650

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