Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 2, Problem 8CE
Jean and Tom Perritz own and manage Happy Home Helpers, Inc. (HHH), a house-cleaning service. Each cleaning (cleaning one house one time) takes a team of three house cleaners about 1.5 hours. On average, HHH completes about 15,000 cleanings per year. The following total costs are associated with the total cleanings:
Next year, HHH expects to purchase $25,600 of direct materials. Projected beginning and ending inventories for direct materials are as follows:
There is no work-in-process inventory and no finished goods inventory; in other words, a cleaning is started and completed on the same day. HHH expects to sell 15,000 cleanings at a price of $45 each next year. Total selling expense is projected at $22,000, and total administrative expense is projected at $53,000.
Required:
1. Prepare an income statement in good form.
2. What if Jean and Tom increased the price to $50 per cleaning and no other information was affected? Explain which line items in the income statement would be affected and how.
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Tim Urban, owner/manager of Urban's Motor Court in Key West, is considering outsourcing the daily room cleanup for his motel to Duffy's Maid Service. Tim rents an average of 50 rooms for each of
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Chapter 2 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 2 - What is an accounting information system?Ch. 2 - What is the difference between a financial...Ch. 2 - What are the objectives of a cost management...Ch. 2 - Define and explain the two major subsystems of the...Ch. 2 - What is a cost object? Give some examples.Ch. 2 - Prob. 6DQCh. 2 - What is a direct cost? An indirect cost?Ch. 2 - Prob. 8DQCh. 2 - What is allocation?Ch. 2 - Explain how driver tracing works.
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