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