Exercise 7-34 Job Costing in a Service Organization (LO 7-4) Allocation Busters
ID: 2416309 • Letter: E
Question
Exercise 7-34 Job Costing in a Service Organization (LO 7-4) Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 452 hours for Massive Airframes and 662 hours for Gigantic Drydocks. AB bills clients at the rate of $509 per hour; labor cost for its professional staff is $220 per hour. Overhead costs in March totaled $40,930. Overhead is applied to clients at $45 per labor-hour. In addition, AB had $199,500 in marketing and administrative costs. All transactions are on account. All services were billed.
Required: (a) Show labor and overhead cost flows through T-accounts.
Explanation / Answer
a.
Wages payable
$ 245,080.00
*(662+452) * $220 = $245,080
Work in process
$ 245,080.00
$ 295,210.00
$ 50,130.00
*(662+ 452)*$45 = $50,130
Cost of service billed
$ 295,210.00
$9,200.00
*$50130 - $40,930 = $9,200
Section overhead control
$ 40,930.00
$ 40,930.00
Applied service overhead
$ 50,130.00
$ 50,130.00
Wages payable
$ 245,080.00
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