Question

Calculator Job Order Cost Accounting for a Service Company The Fly Company provides advertising services for dients across the nation. The Fly Company is presently working on four projects, each for a different client. The Fly Company accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs. The direct costs include the charged time of professional personnel and media purchases (air time and ad space) Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 55% of media purchases. On August 1, the four advertising projects had the following accumulated costs: August 1 Balances Vault Bank $83,000 Take Off Airlines 24,900 Sleepy Tired Hotels 58,100 Tastee Beverages 35,700 Total $201,700 During August, The Fly Company incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts: Vault Bank Take Off Airlines Direct Labor $57,000 25,400 112,100 Sleepy Tired Hotels Tastee Beverages Media Purchases $219,400 193,100 141,000 105,500 $659,000 127,500 Total $322,000 Next N O P W ENG.

Answer 1

Solution:

Journal Entries:

a.)

No.	Account Title and Explanation	Debit ($)	Credit ($)
a.	Work in process	322,000
	Wages payable		322,000
	(To record direct labor costs for the month)

b.)

No.	Account Title and Explanation	Debit ($)	Credit ($)
b.	Work in process	659,000
	Media purchases payable		659,000
	(To record media purchases for the month)

c.)

No.	Account Title and Explanation	Debit ($)	Credit ($)
c.	Work in process	$362,450($659,000 × 55%)
	Project overhead		362,450
	(To record the applied overhead for the month)

d.)

No.	Account Title and Explanation	Debit ($)	Credit ($)
d.	Cost of service	829,675
	Work in process		829,675
	(To record the completion of Vault Bank and Take Off Airlines for the month)

* Total cost of Vault Bank job:

Accumulated costs + direct labor + media purchases + predetermined overhead (55% of media purchases )

$83,000 + $57,000 + $219,400 +$120,670($219,400 ×55%)

$480,070

Total cost of Take Off Airlines:

Accumulated costs + direct labor + media purchases + predetermined overhead (55% of media purchases)

$24,900 + $25,400+ $193,100 + $106,205 ($193,100 × 55%)

=$ 349,605

Total cost of completed jobs = $480,070 + $349,605

= $829,675