Berry Company is an architectural firm located in Detroit, Michigan. Companies working with

small and medium construction businesses to prepare building plans according to client contracts. The following data is provided for the previous year:

1. Number of designs completed and sold 700

2. Beginning direct materials inventory $20,000

3. Initial inventory of designs in process 60,000

4. Ending direct materials inventory 10,000

5. Final inventory of designs in progress 100,000

6. Purchase, direct materials 40,000

7. Direct labor $800,000

8. Production overhead 100,000

9. Administrative costs 150,000

10. Sales costs 60,000

11. Initial inventory of finished designs is 300,000

12. Finished design ending inventory 280,000

Required:

1. Calculate the cost of production.

2. Calculate the cost of goods sold.

3. Assume the average cost for a design is $2,100. Prepare Berry's income statement.

4. CONCEPTUAL RELATIONSHIP Refers to the cost of goods sold (calculated in Requirements. What is the dominant cost? Briefly explain why this cost is the dominant cost for Berry.