Question

Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 447 hours for Massive Airframes and 665 hours for Gigantic Drydocks. AB bills clients at the rate of $519 per hour; labor cost for its professional staff is $200 per hour. Overhead costs in March totaled $40,490. Overhead is applied to clients at $41 per labor-hour. In addition, AB had $199,100 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 March.

Answer 1

solution wages work in process payable २२२५०० 267992 २२२५०० 45592- * (665+ ५५न)x 200 = २२२५०० * (665+447)x41-45592 Cost of service billed Section overhead control २०११2 5102- ५०५१० ५०५१० * 4559२ - 40490 = Appleed service overhead 45592 45592-

Income statement for the March Ended March 31 574128 5102 262890 Service Reverwe [447 +665 x 519] Cost of service Billed 267992 (-) overappleed Service Gross margen Marketing & Admin Experse operating profit 314238 199100 115138