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
