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CoursHeroTranscribedText: U Problem 2.34 Income Statement, Cost of Services Provided, Service Attributes Objective 3 , 4 Mason, Durant, and Westbrook [MDWJ is a tax services firm. The rm is located in Oklahoma City and employs 15 professionals and eight staff. The rm 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 Westbrook scal year runs from ]uly 1 through lune 30.) Returns processed $ 3,000 Returns in process, beginning of year 44,000 Returns in process, end of year 13,000 Cost of services sold 1,577,500 Beginning direct materials inventory 20,000 Purchases, direct materials 40,000 Direct labor 1,400,000 Overhead 100,000 Administrative expenses 257,000 Selling expenses 65,000 Required: 1. Prepare a statement of cost of services sold. @J 2. Refer to the statement prepared in Requirement 1. What is the dominant cost? Will this always be true of service organizations? If not, provide an example of an exception. 3. Assuming that the average fee for processing a return is $850, prepare an income statement for Mason, Durant, and Westbrook. Answer Ir 4. Discuss three dierences between services and tangible products. Calculate the average cost of preparing a tax return for last year. How do the differences between services and tangible products affect the ability of MDW to use the last year's average cost of preparing a tax return in budgeting the cost of tax return services to be offered next year

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