Reference no: EM13987509
Lebowski and Associates is an architectural firm that employs 100 professionals and 15 staff. The firm does design work for small and medium-size companies. The fol- lowing data are provided for the year ended June 30, 2008:
Designs processed 9,400
Designs in process, June 30, 2007 $ 900,000
Designs in process, June 30, 2008 1,400,000
Cost of services added 13,550,000 Beginning direct materials inventory 200,000
Purchases, direct materials 400,000 Direct labor 12,000,000
Overhead 1,100,000
Administrative 500,000
Selling 600,000
Required
1. Calculate the direct materials used in the production of services.
2. Prepare a statement of cost of services sold.
3. Refer to the statement prepared in Requirement 1. What is the dominant cost? Will this always be true of service organizations? If not, provide an example of an exception.
4. Assume that the average fee for a design is $1,950. Prepare an income statement for Lebowski and Associates.
5. Discuss four differences between services and tangible products. How do these differences affect the computations in Requirement 1?
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