Cost of Services Produced Jean and Tom Perritz own and manage Happy Home Helpers
ID: 2530131 • 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 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings:
Next year, HHH expects to purchase $25,600 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 $30,000 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 $472,500 Variable overhead 15,000 Fixed overhead 18,000Explanation / Answer
Happy Home Helpers,Inc.
Statement of Cost of ServicesProduced
For the Coming Year In $
Direct Material in the beginning 4000
Add: Material Purchased 25600
Less: Material at the end (2600)
Material used 27000
Direct Labour 472500
Cleaning Overhead 33000
Total Services production cost added 532500
Add: Beginning WIP 0
Less: Ending WIP 0
Cost of services produced 532500
(B) Cost of services produced will increase by 4400 i.e. 532500+4400=536900 if raw material purchased increases from 25600 to 30000 assumind other things as same