Berry Company is an architectural firm located in Detroit, Michigan. The company works with small and medium-size construction businesses to prepare building plans according to client contract. Berry employs 10 professionals and 5 staff. The following data are provided for last year:

Number of designs completed and sold 700

Beginning inventory of direct materials $20,000

Beginning inventory of designs in process $60,000

Ending inventory of direct materials $0

Ending inventory of designs in process $100,000

Purchases, direct materials $40,000

Direct labour $800,000

Manufacturing overhead $100,000

Administrative expense $150,000

Selling expense $60,000

Required:

1. Calculate the cost of services sold.

2. Assume that the average fee for a design is $2,100 Prepare an income statement for Berry Company.

3. Refer to the cost of services sold (calculated 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. Why does Berry Company show zero inventory of finished plans? What change(s) in the company could result in a positive finished goods inventory?