Question

Exercise 7-41 (Algo) Job Costing in a Service Organization (LO 7-4) For August. Royal Consulting and Mediation Practice (RCMP) worked 1,050 hours for Alberta Company and 2,250 hours for Ontario Corporation. RCMP bills clients at the rate of $480 per hour; labor cost for its consulting staff is $280 per hour. The total number of hours worked in August was 3,300, and overhead costs were $68,000. Overhead is applied to clients at $25 per labor-hour. In addition, RCMP had $280,000 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 Record Cost of services billed (d) Record Actual Service Overhead (0) Required: a. Show labor and overhead cost flows through T-accounts. b. Prepare an income statement for the company for August. Complete this question by entering your answers in the tabs below. Required A Required B Show labor and overhead cost flows through T-accounts. Work-In-Process Beg. bal. Beg. bal. Wages Payable 0 924,000 (a) 924,000 End. bal. (b) End. bal. 924,000 82,500 1,006,500 Cost of Services Billed Service Overhead Control 0 Beg. bal. Beg. bal. (C) 68,000 (6) End. bal. End. bal. 68,000 Applied Service O.H. 1.Beg bal. ............

Answer 1

@ T. accounts Wages Payable Beg bal Enid.bal $924000(a) € 924000 work in - Pirocess -Bog.bal. © b End. bal p 924000 $1006500 $_sasoo Costel Service Belled Beg.bala -_ -End bal. I . 11006500$ 145001 Closing $ 992000 Service Orechead conticol - Beg.bal. 68000 $68000 | closing - End.bale Applied Genxice 0.4. Beg-bal. closing End.bal. $82500 $82500 (6) 0

Company Explanations : a) Albercla company a{ caso perheen y losohours) a $ 294000 Ontario company » ($ a8openhour X aaso how $630,000 laborcest - († 994000 +8630,000) 924000 b) Applied sevice Overhead : (fas per howa X to sohous LxAlberta - $ 26250 .($95 perc hour x 2250 hours -> Ontario campany $56250 Applieel service overhead =($26 a50 +$ 56250) = '$82500 c): Cosid of Servicebelled Sum of work done during Aegost, - all belled to clients. I = $924000 + $82500 ...= $ 1006500 d) Actual Service Overheede $68000 * closing emelny fo reported: ... overapplied derhead ; verveleef 82500 applied - $68000 aclual) 2 $ 14500 et

Income statemend. ROYAL CONSULTING AND MEDIATION PRACTICE Income Statement -For the Month Ended August 31 Service Revenue $1584000. Cost of services billed _1006500 sublocael; Overcepplied Service overhead $ 14500 $_992000 Guros_maregon, $_592000 Marckeling and administrece tipo $_280.000 Operating profLL 312000 Explanations : * Service Revenue - ( 3300 hours X $ 480) = $ 1584,000 * G tross mcongen - ($ 1584000 – 9 99 2000) i § 592000 * Operating profit = ($ 592000 – $280.000) - $312000 Aru) ting rett -