Costs of Services Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (
ID: 2336603 • Letter: C
Question
Costs of Services
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 1.8 hours. On average, HHH completes about 18,000 cleanings per year. The following total costs are associated with the total cleanings:
Required:
If required, round your answers to the nearest cent.
1. Calculate the prime cost per cleaning.
$per cleaning
2. Calculate the conversion cost per cleaning.
$per cleaning
3. Calculate the total variable cost per cleaning.
$per cleaning
4. Calculate the total service cost per cleaning.
$per cleaning
5. What if rent on the office that Jean and Tom use to run HHH increased by $1,800? Which of the following statements best describes the effect of this on HHH's costs?
Prime costs would increase
Conversion costs per cleaning would increase
Total service costs per cleaning would decrease
Total variable costs would decrease
Direct materials $43,200 Direct labor 567,000 Variable overhead 25,200 Fixed overhead 28,800Explanation / Answer
1) Prime cost per cleaning = (43200+567000)/18000 = $33.90 per cleaning
2) Conversion cost per cleaning = (567000+25200+28800)/18000 = 3$4.50 per cleaning
3) Variable cost per cleaning = (43200+567000+25200)/18000 = $35.30 per cleaning
4) Total service cost per cleaning = (43200+567000+25200+28800)/18000 = $36.90 per cleaning
5) What if rent on the office that Jean and Tom use to run HHH increased by $1,800? Which of the following statements best describes the effect of this on HHH's costs
So answer is b) Conversion costs per cleaning would increase