Cost of Services Sold Jean and Tom Perritz own and manage Happy Home Helpers, In
ID: 2329830 • Letter: C
Question
Cost of Services Sold Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings: Direct materials Direct labor Variable overhead Fixed overhead Next year, HHH expects to purchase $25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows: $472,500 15,000 18,000 Direct Materials Inventory Beginning Ending There is no work-in-process inventory and no finished goods inventory; in other words, a cleaning is started and completed on the same day. $4,000 2,600Explanation / Answer
Answer:
Happy Home Helpers, Inc.
Statement of Cost of Services Sold
For the Coming Year
Cost of services produced
$532,500
Add: Beginning finished goods*
0
Less: Ending finished goods
0
Cost of services sold
$532,500
Working notes for the above answer is as under
1
Happy Home Helpers, Inc.
Statement of Cost of Services Produced
For the Coming Year
Direct materials
Beginning inventory
4,000
Add: Purchases
25,600
Materials available
29,600
Less: Ending inventory
2,600
Direct materials used in production
27,000
Direct labor
472,500
Cleaning overhead (15000+18000)
33,000
Total services production costs added
$532,500
Add: Beginning work in process*
0
Less: Ending work in process
0
Cost of services produced
$532,500
2
As in the question it was given that there is no work in progress inventory or finished goods inventory FG and WIP inventory are shown as 0.
The beginning and ending work-in-process amounts could clearly be eliminated. They are shown here to reinforce the concept that for this firm, with no work in process, total services production cost equals cost of services produced.
Happy Home Helpers, Inc.
Statement of Cost of Services Sold
For the Coming Year
Cost of services produced
$532,500
Add: Beginning finished goods*
0
Less: Ending finished goods
0
Cost of services sold
$532,500