Question

8.

For August, Royal Consulting and Mediation Practice (RCMP) worked 900 hours for Alberta Company and 1,800 hours for Ontario Corporation. RCMP bills clients at the rate of $560 per hour; labor cost for its consulting staff is $360 per hour. The total number of hours worked in August was 2,700, and overhead costs were $56,000. Overhead is applied to clients at $26 per labor-hour. In addition, RCMP had $320,000 in marketing and administrative costs. All transactions are on account. All services were billed.

Transaction	Description
(a)	Record Labor cost
(b)	Record Applied Service Overhead
(c)	Record Cost of services billed
(d)	Record Actual Service Overhead

Required:

a. Show labor and overhead cost flows through T-accounts.

b. Prepare an income statement for the company for August.

Answer 1

tfor August RONal consulting wages Payable 92000 work In Pa0gress (c) F972000 C) F 1042 20o 70200 $ 1042,200 & (O42 200 COSHOF Seie Billed r4200 1042,200 F 102800O End ba senie oveahead contod 56000 56000 56000 S6000 APPlied seice oH F0200 F0200 F 020O HOZOC EXPlanation awages: P 96000 972000 C900 HOurX $ 360 t [1800 houx xF 360) boveahead $70200 C900 HOU X 26) t C1800 hour x s 26

cost of sesvice Billed: 7200O t $ 30200 10,42 200 aclosing Entny to ecose overapplied ot: APPlied ( 30200) $56000 (Actial) S14200 Overapplied (b ROyal consul+ing and mediation pacictise Income statement for the month Ended Aygust 3 sale Revenue 1512000 Kro28000) 484000 3 20000) Loss costOf seruice illed markating c Aelmin OpeaeHg Poft 164000 TO0 t 1800 RO0 HHOOS X 560 FIS, 12,000