Question

Problem 3 (Cost Flows in a service organization) For the month of March CBL Consulting Group worked 400 hours for Dynasty Manufacturing, 100 hours for Golden Manufacturing and 200 hours for Commissions, Inc. CBL bills clients at the rate of P100 per hour, while labor cost is P40 per hour. A total of 800 hours were worked in March, with 100 hours not billable to clients. Overhead costs of P12,000 were assigned to jobs (that is, clients) on the basis of direct labor-hours. Since 100 hours were not billable, some overhead was not assigned to jobs. CBL had P6,000 marketing and administrative costs. All transactions are on account. a. b. c. Show the flow of cost through T-accounts. Prepare an income statement for CCG for the month ended March 31. Prepare journal entries.

Answer 1

	CBL Consulting Group
	Journal entries;
Date	Account's tittle	Debit	Credit
1	Accounts Receivable ( 800 hours x P100 per hour)	80,000
	Service Revenue		80,000
	( To record service revenue billed )
2	Direct Labor cost ( 800 hours x P 40 per hour )	32,000
	Accounts Payable		32,000
	( To record Labor cost incurred )
3	Overhead cost	12,000
	Accounts Payable		12,000
	( To record overhead cost incurred )
4	Marketing and Administrative costs	6,000
	Accounts Payable		6,000
	( To record
	CBL Consulting Group
	Income Statement
	Service Revenue	80,000
	Less: Direct Labor cost	(32,000)
	Gross Profit		48,000
	Overhead cost	12,000
	Marketing and Administrative costs	6,000
	Total operating expenses		18,000
	Net income		30,000

Accounts Receivable
	Account's tittle	Debit	Account's tittle	Credit
	Service Revenue	80,000
			Balance c/d	80,000
	TOTAL	80,000	TOTAL	80,000
Service Revenue
	Account's tittle	Debit	Account's tittle	Credit
			Accounts Receivable	80,000
	Balance c/d	80,000
	TOTAL	80,000	TOTAL	80,000
Direct Labor cost
	Account's tittle	Debit	Account's tittle	Credit
	Accounts Payable	32,000
			Balance c/d	32,000
	TOTAL	32,000	TOTAL	32,000
Accounts Payable
	Account's tittle	Debit	Account's tittle	Credit
			Direct Labor cost	32,000
			Overhead Cost	12,000
			Marketing and Administrative costs	6,000
	Balance c/d	50,000
	TOTAL	50,000	TOTAL	50,000
Overhead Cost
	Account's tittle	Debit	Account's tittle	Credit
	Accounts Payable	12,000
			Balance c/d	12,000
	TOTAL	12,000	TOTAL	12,000
Marketing and Administrative costs
	Account's tittle	Debit	Account's tittle	Credit
	Accounts Payable	6,000
			Balance c/d	6,000
	TOTAL	6,000	TOTAL	6,000