Internet Designs, a Web site design and maintenance firm, uses job costing. During November, the firm provided Web site services for two clients and billed those clients for the services performed. Internet Designs billed Mountain View Company for $200,000 and Palatine Productions for $100,000. Direct labor costs were $80 per hour. Internet Designs worked 1,500 hours on the Mountain View account and 900 hours on the Palatine account. The firm worked an additional 100 hours that it did not charge to either account. The firm assigns overhead to jobs at the rate of $60 per billable hour. During November, the firm incurred actual overhead of $140,000. The firm incurred marketing and administrative costs of $60,000. All transactions were on account.
a. Show how Internet Designs’ accounting system would record these revenues and costs using journal entries.
b. Prepare an income statement for November like the one in Exhibit 2.5.
c. Were the two jobs profitable for Internet Design?