Question

Cornerstone Exercise 2.7 Cost of Services Sold 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 Direct materials Direct labor Variable overhead Fixed overhead $472,500 15,000 18,000 Next year, HHH expects to purchase $25,600 of direct materials. Projected beginning and end ing inventories for direct materials are as follows: Beginning Ending Direct Materials Inventory $4,000 2,600 There is no work-in-process inventory and no finished goods inventory; in other words, a clean- ing is started and completed on the same day Required . Prepare a statement of cost of services sold in good form. 2. How does this cost of services sold statement differ from the cost of goods sold statement for a manufacturing firm?

Answer 1

1) Statement of cost of services:
Cost of services :
		Amount $
Direct Material:
OB	$4,000
add:Purchases	25600
Total Mat. Available	$29,600
Less:CB	2600
Material consumed		$27,000
Direct Labor		472500
Variable overhead		15000
Total Variable cost of services		$514,500
Total Fixed Cost/overhead		15000
Total Cost of Services		$529,500
2) The difference between Statement of cost of services sold and Statement
of cost of goods sold is that there is pending closing stock of finished manufactured
in the manufacturing firm whereas no such closing services exists in Service firm.