An appliance repair shop purchased materials costing $9,000 in May. The beginning inventory of material parts was $4,500 and the ending inventory of material parts was $4,000. Payments for direct labour for May totalled $27,000, secretarial costs were $2,000, and overhead of $5,000 was incurred. In addition, $5,000 was spent on advertising and $2,000 for the franchise name. Revenue for May was $50,000.
-Refer to the figure.What is the cost of services sold for May?

Question

Quizplus · Accepted Answer

The cost of services sold for May can be calculated by adding the cost of materials used, direct labor, and overhead. The cost of materials used is found by adding the beginning inventory to the purchases and then subtracting the ending inventory: $4,500 + $9,000 - $4,000 = $9,500. Adding this to the direct labor ($27,000) and overhead ($5,000) gives a total cost of services sold of $41,500. Secretarial costs, advertising, and franchise fees are not included in the cost of services sold.

An Appliance Repair Shop Purchased Materials Costing $9,000 in May