Calculating the Cost of Jobs and Making Journal Entries for a Service Company Sa

Question

Calculating the Cost of Jobs and Making Journal Entries for a Service Company Sampson & Associates provides accounting services. It began Jobs I through 3 in the first week of January. The following transactions occurred that week. (LO1, L02, L03, LO5, L06, L07, L08) Purchased supplies on account totaling $1,500. Used supplies totaling $800 for various jobs. Processed timesheets showing the following: Job 1. direct labor (50hours ) $1,500 Job 2. direct labor (60 hours) 1.700 Job 3. direct labor (10 hours) 400 Indirect labor 900 Total $4,500 Applied overhead using a predetermined rate of 510 per direct labor hour. Completed Job 1 and billed the customer $3,000. (Hint: TWo entries are required-one for the cost of services, and another for revenue.) Required Calculate the costs incurred for each of the three jobs. Make the appropnate journal entry for each item described above. Assume all payments will be made next month. (Hint: Use Exhibit 2.9 as a guide.) How much gross profit did Sampson & Associates earn from job 1?

Explanation / Answer

Job1 Job2 Job3 1 Direct Labor cost 1500 1700 400 Indirect Labor 375 450 75 Over Head Applied 500 600 100 Supplies 333 378 89 3128 664 2 Journal Entries : WIP ( job 1) 2708 WIP ( job 2) 3128 WIP (Job 3 ) 664        Direct Wages Payable 3600        Overhead Expense Outstanding 1200       Indirect Wages Payable 900        Supplies Expense Payable 800 3 Total Cost 2708 Revenue from the job 3000 Gross Profit 292

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