TechMaster is an information technology (IT) consulting company offering service
ID: 2539052 • Letter: T
Question
TechMaster is an information technology (IT) consulting company offering services to small firms. TechMaster bills clients for its various services based on the hours its professionals spend. In August, IT professionals billed 885 hours to clients and worked a total of 940 hours (the difference includes time for training, preparing bids, and so on, which are considered administrative costs). TechMaster bills clients at the rate of $220 per hour; labor cost for its IT professionals is $85 per hour. Overhead costs in August totaled $37,000. Overhead is applied to clients at $47 per labor-hour. In addition, TechMaster had $57,000 in marketing and administrative costs (including labor time as described above). 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 August.
Explanation / Answer
Answer
A.labor and overhead cost flows through T-accounts:
Wages Payable $85*885 =$75225
Wages Payable
Work In Process= $47*875
Work In Process
Cost of services billed =41125-37000 = 4125
Cost of services billed
Service Overhead control
Applied Service Overhead
B.Income statement for the company for August.
Cost of service billed, less:Over applied service Overhead
($116350-$4125)
opening Balance Ending bal. 75225 Work in progress 75225Related Questions
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