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	1,578,000
Beginning direct materials inventory	20,000
Purchases, direct materials	40,000
Direct labor	1,400,000
Overhead	100,000
Administrative expenses	255,000
Selling expenses	65,000

Required:

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	____
Less: Ending work in process	___
Cost of services sold	$___

3. Assuming that the average fee for processing a return is $840, 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		$____

4. Calculate the average cost of preparing a tax return for last year. When required, round your answer to the nearest dollar.

$___ per return