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Income Statement, Direct and Indirect Cost Concepts, Service Company

Lakeesha Barnett owns and operates a package mailing store in a college town. Her store, Send It Packing, helps customers wrap items and send them via UPS, FedEx, and the USPS. Send It Packing also rents mailboxes to customers by the month. In May, purchases of materials $($stamps$,$ cardboard boxes, tape, Styrofoam peanuts, bubble wrap, etc.$)$ equaled $$11,450$; the beginning inventory of materials was $$1,050,$ and the ending inventory of materials was $$950.$ Payments for direct labor during the month totaled $$25,570.$ Overhead incurred was $$18,130($including rent, utilities, and insurance, as well as payments of $$14,050$ to UPS and FedEx for the delivery services sold$).$ Since Send It Packing is a franchise, Lakeesha owes a monthly franchise fee of $5$ percent of sales. She spent $$2,750$ on advertising during the month. Other administrative costs $($including accounting and legal services and a trip to Dallas for training$)$ amounted to $$3,650$ for the month. Revenues for May were $$102,100.$

Required:

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$1.$ What was the cost of materials used for packaging and mailing services during May?

$fill in the blank $150$b$08$f$9$d$000067\_1$

$2.$ What was the prime cost for May?

$fill in the blank $150$b$08$f$9$d$000067\_2$

$3.$ What was the conversion cost for May?

$fill in the blank $150$b$08$f$9$d$000067\_3$

$4.$ What was the total cost of services for May?

$fill in the blank $150$b$08$f$9$d$000067\_4$

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$1.$ Beginning materials inventory plus materials purchased less ending materials inventory equals cost of materials used.

$2.$ Prime cost consists of direct materials plus direct labor.

$3.$ Conversion cost consists of direct labor plus overhead.

$4.$ Total cost of services consist of direct materials, direct labor, and overhead.

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$5.$ Prepare an income statement for May.

Send it Packing

Income Statement

For the Month Ended May $31$

$$-$ Select $-$

$-$ Select $-$

$$-$ Select $-$

Operating expenses:

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$$-$ Select $-$

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$5.$ In calculating cost of services sold, remember that a service company does not have finished goods inventory since services cannot be stored.

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$6.$ Of the overhead incurred, is any of it direct?

Of the overhead incurred, is any of it indirect?