Question

EX 19-17 Job order cost accounting for a service company The Fly Company provides advertising services for clients across the nation. The Fly Company OBJ. 4 vd. Dr. Cost of Services, $2,827,750is 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 (ain time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 69% of media purchases. On August 1, the four advertising projects had the following accumulated costs: August 1 Balances Vault Bank Take Off Airlines Sleepy Tired Hotels 270,000 80,000 210,000

Answer 1

Solution:

	Particulars	Debit	Credit
a	Work in process	1,068,000
	Direct labor		1,068,000
b	Work in process	2,130,000
	Media purchase		2,130,000
c	Work in process	1,384,500
	Overhead cost applied		1,384,500
	(65% × $2,130,000)
d	Cost of Services	2,827,750
	Work in process		2,827,750

Working:

	Opening Balance	Direct Labor	Media Purchase	Overhead	Total
Vault Bank	270,000	190,000	710,000	461,500	1,631,500
Take Off Airlines	80,000	85,000	625,000	406,250	1,196,250
Total					2,827,750