Cost of Services Produced Jean and Tom Perritz own and manage Happy Home Helpers
ID: 2336611 • 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 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 ?
Direct labor $270,900
Variable overhead 12,600
Fixed overhead 14,400
Next year, HHH expects to purchase $29,000 of direct materials. Projected beginning and ending inventories for direct materials are as follows:
Direct materials Inventory
Beginning $4,400
Ending 3,000
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".
Happy Home Helpers, Inc.
Statement of Cost of Services Produced
For the Coming Year
Direct materials
Beginning inventory $
Add: Purchases
Materials available $
Less: Cleaning overhead
Direct materials used in production $
Direct labor
Cleaning overhead
Total services production costs added $
Add: Beginning work in process
Less: Ending inventory
Cost of services produced $
2. What if HHH planned to purchase $33,800 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 increase by $
Explanation / Answer
Statement of services
Happy Home Helpers Inc.
2.Cost of services produced would increase by $4,800.
(difference in purchases =>$33,800 - 29,000 =>$4,800 is the increase in direct materials used in production, which inturn would lead to increase in cost of services produced to (328,300+4,800)=>$333,100).
Direct materials beginning inventory $4,400 add: purchases 29,000 materials available 33,400 less:ending inventory (3,000) direct materials used in production 30,400 direct labour 270,900 cleaning overhead (14,400+12,600) 27,000 total services production costs 328,300 add:beginning work in process 0 less:ending work in process 0 cost of services produced 328,300