Garrett Peckam owns and operates three Muffle-Man outlets in Fort Worth, Texas. Muffle-Man specializes in replacing mufflers with mufflers that have a lifetime guar- antee. Muffle-Man is a franchise popular throughout the Southwest. In April, pur- chases of materials equaled $175,000, the beginning inventory of materials was
$14,000, and the ending inventory of materials was $17,300. Payments to direct labor during the month totaled $30,960. Overhead incurred was $145,000. The Fort Worth outlets also spent $25,000 on advertising and selling expenses during the month. A franchise fee of $3,000 per outlet is paid every month. Revenues for April were $410,000.
Required
1. What was the cost of materials used for muffler-changing services during April?
2. What was the prime cost for April?
3. What was the conversion cost for April?
4. What was the total service cost for April?
5. Prepare an income statement for the month of April.
6. Muffle-Man purchases all its mufflers from Remington Company, a manufac- turer of mufflers. Discuss the differences between the products offered by Rem- ington and Muffle-Man.
