Clean Sweep Agreed to Clean an Office Building on a Weekly

question 78

Short Answer

Clean Sweep agreed to clean an office building on a weekly basis for $1,000 per week.The contract began on August 15,and Clean Sweep cleaned the building twice during August.Clean Sweep received $1,000 cash in August.During August,Clean Sweep spent $400 on wages for the workers who cleaned the building,$90 for the cleaning supplies used,and $4,000 to purchase specialized cleaning equipment.How much revenue should Clean Sweep recognize in August using cash-basis accounting?

---

Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product.

Factory Overhead

All indirect costs associated with manufacturing, including but not limited to utilities, maintenance of equipment, and factory staff salaries, excluding direct labor and direct materials.

Absorption Costing Income Statement

An income statement format that incorporates the full cost of manufacturing a product, including both fixed and variable manufacturing costs, in determining the cost of goods sold.