Mason, Durant, and Westbrook (MDW) is a tax services firm. The firm is located in Oklahoma City and employs 15 professionals and eight staff. The firm 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 fiscal year runs from July 1 through June 30.) 

Returns processed ...........................................3,000 

Returns in process, beginning of year .......$43,000 

Returns in process, end of year ...................14,000 

Cost of services sold ...............................1,578,000 

Beginning direct materials inventory ......20,000 

Purchases, direct materials ......................40,000 

Direct labor ...........................................1,400,000 

Overhead ...............................................100,000 

Administrative expenses ...................255,000 

Selling expenses .............................65,000 

Required: 

1. Prepare a statement of cost of services sold. Mason, Durant, and Westbrook Statement of Cost of Services Sold For the Year Ended June 30 $ $ Cost of services sold $ 

2. Refer to the statement prepared in Requirement 1. What is the dominant cost? Will this always be true of service organizations?

3. Assuming that the average fee for processing a return is exist850, prepare an income statement for Mason, Durant, and Westbrook. 

4. Discuss three differences 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?