Costs of Services Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (

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 0.9 hours. On average, HHH completes about 9,000 cleanings per year. The following total costs are associated with the total cleanings:

Direct materials $19,800
Direct labor 309,600
Variable overhead 13,500
Fixed overhead 15,300

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 $900? Which of the following statements best describes the effect of this on HHH's costs?

Explanation / Answer

a) Prime cost per cleaning = (19800+309600)/9000 = $36.60 per cleaning

b) Conversion cost per cleaning = (309600+13500+15300)/9000 = $37.60 per cleaning

c) Variable cost per cleaning = (19800+309600+13500)/9000 = $38.10 per cleaning

d) Total service cost per cleaning = (19800+309600+13500+15300)/9000 = $39.80 per cleaning

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