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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Job order cost accounting entries for a service business
Media Conned Inc. provides advertising services for clients across the nation. Media Connect is presently working on four projects, each for a different client. Media Connect 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 (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 40% of media purchases. On April 1, the four advertising projects had the following accumulated costs:


During April, Media Connect incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts:


At the end of April, both the First Bank and Reliable Airlines campaigns were completed. The costs of completed campaigns are added to the cost of services account. Determine each of the following for the month:
a.Direct labor or costs.
b.Media purchases.
c. Overhead applied.
d.Cost of completed First Bank and Reliable Airlines campaigns.

To determine

Concept Introduction:

Direct material cost: All the cost which is associates to the purchase of raw material is called direct material cost.

Direct labor cost: All the cost which is associated to the labor which helps the organization to convert the raw material into the finished goods is called direct labor cost.

Manufacturing Overhead: All the cost which includes indirect material, indirect labor cost and the applied manufacturing is calculated on the direct labor cost or on direct labor cost or any other method given by the question.

To Calculate:

Direct labor cost, Media purchase, Overhead applied, cost of completed projects.

Explanation

a. Direct labor cost= Project1 + Project2 + Project3+ Project4

= 115000+ 84000+ 110000+ 125000

= 434000

b. Media Purchase = Project1 + Project2 + Project3+ Project4

= 480000+ 320000+ 200000+ 300000

= 1300000

c. Overhead applied= Media purchase* 40%

= 1300000* 40%

= 520000

d...

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