Leeds Architectural Consonants began operations on January 2 The following activ

Question

Leeds Architectural Consonants began operations on January 2 The following activity was recorded in the companys Work m Process account (or the NO month of operators Leeds Architectural Consultants is a service firm, so the names of the accounts it uses are different from the names used m manufacturing companies Costs of Subcontracted Work is comparable to Orect Materials Orect Staff Costs is the same as Direct Labor. Studio Overhead is the same as Manufacturing Overhead and Computed Projects is the same as Finished Goods Apart from the deference m terms, the accounting methods used by the company are identical to the methods used by manufacturing companies

Explanation / Answer

Leeds Architecture consultants Work In progress A/c

Cost of Substantial Products ( Direct Materials )

$                                       90,000

To Completed Projects

$                             543,500

Direct Staff Costs ( Direct Labour)

$                                     199,000

To Bal c/d

$                                44,000

Studio Overhead ( Overheads )

$                                     298,500

Total

$                                     587,500

Total

$                             587,500

Overheads are absorbed on the basis of Direct Staff costs

Overhead absorption Rate = Total Overheads/Direct staff costs

1.50

Predetermined overhead Rate

Cost Summary for one Job at end of January

Particulars

Amount

Direct Materials [ ( 44000 * 90000)/543500 ]]

$                                          7,286

Direct Staff costs

$                                       13,300

Overheads = Rate* Direct Staff costs

$                                       19,950

Total Job cost

$                                       40,536

Leeds Architecture consultants Work In progress A/c

Cost of Substantial Products ( Direct Materials )

$                                       90,000

To Completed Projects

$                             543,500

Direct Staff Costs ( Direct Labour)

$                                     199,000

To Bal c/d

$                                44,000

Studio Overhead ( Overheads )

$                                     298,500

Total

$                                     587,500

Total

$                             587,500

Overheads are absorbed on the basis of Direct Staff costs

Overhead absorption Rate = Total Overheads/Direct staff costs

1.50

Predetermined overhead Rate

Cost Summary for one Job at end of January

Particulars

Amount

Direct Materials [ ( 44000 * 90000)/543500 ]]

$                                          7,286

Direct Staff costs

$                                       13,300

Overheads = Rate* Direct Staff costs

$                                       19,950

Total Job cost

$                                       40,536

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