Discuss differences between services and tangible products

Assignment Help Cost Accounting

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.)

Returns process	3,000
Returns in process, beginning of year	$44,000
Returns in process, end of year	73,000
Cost of services sold	1,557,500
Beginning direct materials inventory	20,000
Purchases, direct materials	40,000
Direct labor	1,400,000
Overhead	100,000
Administrative expenses	257,000
Selling expenses	65,000

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?

Reference no: EM13901179

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