Question

For the month of July, UP Payroll Services worked 2,000 hours for Dune Motors, 600 hours for Jake’s Charters, and 1,000 hours for Mission Hospital. UP bills clients at $124 an hour; its labor costs are $47 an hour. A total of 4,000 hours were worked in July with 400 hours not billable to clients. Overhead costs of $32,000 were incurred and were assigned to clients on the basis of direct labor-hours. Because 400 hours were not billable, some overhead was not assigned to jobs. UP had $30,500 in marketing and administrative costs. All transactions were on account.

Required:

a. What are the revenue and cost per client?

b. Prepare an income statement for July.

Answer 1

a)	revenue and cost per client
		Dune Motors	Jake’s Charters	Mission Hospital	Total
A	Total Billed Hours	2000	600	1000
B	Revenue per client	$        2,48,000	$              74,400	$              1,24,000	$ 4,46,400
	(A*$124)
C)	Labor Cost	$            94,000	$              28,200	$                  47,000	$ 1,69,200
	(A*$47)
D)	Overhead Cost	$            16,000	$                 4,800	$                    8,000	$     28,800
	[($32000/4000)*A)
E)	Total Cost Per Client	$        1,10,000	$              33,000	$                  55,000	$ 1,98,000
	(C+D)
b)	Income Statement For July
	Revenue	$        4,46,400
	Less:
	Labor Cost	$        1,69,200
	Allocated Overhead	$            28,800
	Unallocated Overhead	$              3,200
	($32000-28800)
	income	$        2,45,200