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Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 443 hours for Massive Airframes and 666 hours for Gigantic Drydocks. AB bills clients at the rate of $510 per hour; labor cost for its professional staff is $220 per hour. Overhead costs in March totaled $40,390. Overhead is applied to clients at $44 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.

Wages Payable Work-In-Process Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Cost of Services Billed Service Overhead Control Beg. bal. Beg. bal. End. bal. 0 End. bal. 0 Applied Service O.H. Beg. bal. End. bal. 0

b. Prepare an income statement for the company for March.

ALLOCATION BUSTERS Income Statement For the Month Ended March 31

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