Leeds Architectural Consultants began operations on January 2. The following act

Question

Leeds Architectural Consultants began operations on January 2. The following activity was recorded in the company's Work in Process account for the first month of operations: ork in ProcesS Costs of subcontracted work Direct staff costs Studio overhead 89,000 200,000 260,000 To completed projects 506,000 Leeds Architectural Consultants is a service firm, so the names of the accounts it uses are different from the names used in manufacturing companies. Costs of Subcontracted Work is comparable to Direct Materials; Direct Staff Costs is the same as Direct Labor, Studio Overhead is the same as Manufacturing Overhead; and Completed Projects is the same as Finished Goods. Apart from the difference in terms, the accounting methods used by the company are identical to the methods used by manufacturing companies. Leeds Architectural Consultants uses a job-order costing system and applies studio overhead to Work in Process on the basis of direct staff costs. At the end of January, only one job was still in process. This job (Lexington Gardens Project) had been charged with $13,300 in direct staff costs Required: 1. Compute the predetermined overhead rate that was in use during January. Predetermined overhead rate 2. Complete the following job cost sheet for the partially completed Lexington Gardens Project Job Cost Sheet-Lexington Gardens Project As of January 31 Costs of subcontracted work Direct staff costs

Explanation / Answer

1) Predetermined overhead rate 130% Formula overhead cost/direct labor cost 260,000/200,000 1.3 2) ending in Work in process account is that of Lexington Gardens project because that is the only job left uncompleted Work in process account Costs of Subcontracted work 89,000 to be completed projects 506,000 Direct Staff costs 200,000 Studio overhead 260,000 end bal(lexington job) 43,000 Job cost sheet -Lexington Gardens project Costs of Subcontracted work (balance) 12,410 Direct Staff costs (given) 13,300 Studio overhead (13300*130%) 17290 total cost to January 31 (from above WIP-T account) 43,000

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