The Fly Company provides advertising services for clients across the nation. The Fly Company is 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 (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 50% of media purchases. On August 1, the four advertising projects had the following accumulated costs: August 1 Balances Vault Bank $62,800 Take Off Airlines 18,800 Sleepy Tired Hotels 44,000 Tastee Beverages 27,000 Total $152,600 During August, The Fly Company incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts: Direct Labor Media Purchases Vault Bank $45,500 $161,800 Take Off Airlines 20,300 142,400 Sleepy Tired Hotels 89,400 104,000 Tastee Beverages 101,700 77,800 Total $256,900 $486,000 At the end of August, both the Vault Bank and Take Off Airlines campaigns were completed. The costs of completed campaigns are debited to the cost of services account.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter2: Job Order Costing

Section: Chapter Questions

Problem 16E: Job order cost accounting for a service company The Fly Company provides advertising services for...

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Job Order Cost Accounting for a Service Company

The Fly Company provides advertising services for clients across the nation. The Fly Company is 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 (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 50% of media purchases.

On August 1, the four advertising projects had the following accumulated costs:

	August 1 Balances
Vault Bank	$62,800
Take Off Airlines	18,800
Sleepy Tired Hotels	44,000
Tastee Beverages	27,000
Total	$152,600

During August, The Fly Company incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts:

	Direct Labor	Media Purchases
Vault Bank	$45,500	$161,800
Take Off Airlines	20,300	142,400
Sleepy Tired Hotels	89,400	104,000
Tastee Beverages	101,700	77,800
Total	$256,900	$486,000

At the end of August, both the Vault Bank and Take Off Airlines campaigns were completed. The costs of completed campaigns are debited to the cost of services account.

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