Reference no: EM13901179
INCOME STATEMENT, COST OF SERVICES PROVIDED, SERVICE ATTRIBUTES
Mason, Singh, and Westbrook (MSW) is a tax services firm. The firm is located in Thunder Bay, Ontario, and employs 15 professionals and eight staff. The firm does tax work for small businesses and well-to-do individuals. The following data are provided for the past fiscal year. (The Mason, Singh, and Westbrook fiscal year runs from July 1 through June 30.)
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Returns process
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3,000
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Returns in process, beginning of year
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$44,000
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Returns in process, end of year
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73,000
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Cost of services sold
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1,557,500
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Beginning direct materials inventory
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20,000
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Purchases, direct materials
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40,000
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Direct labor
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1,400,000
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Overhead
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100,000
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Administrative expenses
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257,000
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Selling expenses
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65,000
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Required:
1. Prepare a statement of cost of services sold.
2. 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.
3. Assuming that the average fee for processing a return is $850, prepare an income statement for Mason, Singh, and Westbrook.
4. Discuss three differences between services and tangible products. Calculate the average cost of preparing a tax return for last year. How do the differences between services and tangible products affect the ability of MSW to use the past year's average cost of preparing a tax return in budgeting the cost of tax return services to be offered next year?
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