OBJECTIVE Cornerstone Exercise 25 Costs of Services z own an

OBJECTIVE Cornerstone Exercise 2.5 Costs of Services z own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning eleaning (cleaning one house one time) takes a team of three house cleaners abow average, HHH completes about 15,000 ckeanings per year. The following total CORNERSTONE 2.1 Jean and Tom Perritz mana costs are associated with the total cleanings Direct materials Diroct labor Variable overhead Fixed overhead s 27,000 472.500 15,000 18,000 Required 1. Calculate the prime cost per cleaning. 2. Calculate the conversion cost per cleaning. 3. Calculate the total variable cost per cleaning 4. Calculate the total service cost per cleaning 5. What ifrent on the office that Jean and Tom use to run HHH increased by $1,5002 Explain the impact on the following a. Prime cost per cleaning b. Conversion cost per cleaning c. Total variable cost per cleaning d. Total service cost per cleaning

Solution

Direct material:. 27000/15000 = 1.8

Direct labour:. 472500/15000 = 31.50

Prime cost: 499500/15000 =. 33.30

Manufacturing overhead : 15000/15000 : 1

Conversion cost/variable. 514500/15000: 34.30

Fixed overhead :. 18000/15000: 1.2

Total cost:. 532500/15000 :35.5

5. The impact of change in rent is not seen in prime cost, variable cosy, conversion cost but only in total service cost the impacy in total cost is by 0.1 i.e. 35.6