Cost of Services Produced Jean and Tom Perritz own and manage Happy Home Helpers
ID: 2336604 • Letter: C
Question
Cost of Services Produced
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:
Next year, HHH expects to purchase $39,200 of direct materials. Projected beginning and ending inventories for direct materials are as follows:
There is no work-in-process inventory; in other words, a cleaning is started and completed on the same day.
Required:
1. Prepare a statement of services produced in good form. If an amount is zero, enter "0".
2. What if HHH planned to purchase $44,000 of direct materials? Assume there would be no change in beginning and ending inventories of materials. What effect would this have on cost of services produced?
Cost of services produced would by $
Direct materials ? Direct labor $619,200 Variable overhead 21,600 Fixed overhead 25,200Explanation / Answer
1. Prepare a statement of services produced in good form. If an amount is zero, enter "0".
2) Cost of service produced would by (44000-39200) = $4800 Increase
Happy Home Helpers, Inc. Statement of Cost of Services Produced For the Coming Year Direct materials Beginning direct material 4100 Material purchase 39200 Materials available 43300 Less; Ending direct material -2700 Direct materials used in production 40600 Direct labour 619200 Variable overhead 21600 Fixed overhead 25200 Total services production costs added 706600 Beginning work in process 0 Less: Ending work in process 0 Cost of services produced 706600