Question
Income Statement, Cost of Services Provided, Service Attributes Mason, Durant, and Santos (MDS) is a tax services firm. The firm is located in Oklahoma City
Income Statement, Cost of Services Provided, Service Attributes
Mason, Durant, and Santos (MDS) is a tax services firm. The firm is located in Oklahoma City 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 last fiscal year. (The Mason, Durant, and Santos fiscal year runs from July 1 through June 30.)
Returns processed $3,000
Returns in process, beginning of year 43,000
Returns in process, end of year 12,000
Cost of services sold 1,581,000
Beginning direct materials inventory 20,000
Purchases, direct materials 40,000
Direct labor 1,400,000
Overhead 100,000
Administrative expenses 258,000
Selling expenses 65,000
Required: Question Content Area 1. Prepare a statement of cost of services sold. Mason, Durant, and Santos Statement of Cost of Services Sold For the Year Ended June 30
Direct materials used
Direct labor
Overhead
Total service costs added
Add: Beginning work in process
Add: Beginning work in process
Less: Ending work in process
Less: Ending work in process
Cost of services sold
Question Content Area 2. Refer to the statement prepared in Requirement 1. What is the dominant cost? Direct labor Will this always be true of service organizations? No The situation above might be the case because: Service organizations may have large overhead
Question Content Area 3. Assuming that the average fee for processing a return is $860, prepare an income statement for Mason, Durant, and Santos. Mason, Durant, and Santos Income Statement For the Year Ended June 30
Sales
Cost of services sold
Gross margin
Less operating expenses:
Selling expenses
Administrative expenses
Operating income
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