P 4. Riley & Associates is a CPA firm located in Clinton, Kansas. The firm deals primarily in tax and audit work. For billing of major audit engagements, it uses cost-plus contracts, and its profit factor is 25 percent of total job cost. Costs are accumulated for three primary activities: preliminary analysis, fieldwork, and report development. Current service overhead rates based on billable hours are preliminary analysis, $12 per hour; fieldwork, $20 per hour; and report development,

$16 per hour. Supplies are treated as direct materials and are traceable to each engagement. Audits for three clients—Fulcrum, Inc., Rainy Day Bakeries, and Our Place Restaurants—are currently in process. During March, 2011 costs related to these projects were as follows:

Required 1. Using the format shown in this chapter’s Review Problem, create the job order cost card for each of the three audit engagements.
2. Riley & Associates will complete the audits of Rainy Day Bakeries and Our Place Restaurants by the end of March. What will the billing amount for each of those audit engagements be?
3. What is the March ending balance of Riley & Associates’ Audit in Process account?
Job Order Costing in a Service Organization

Transcribed Image Text:

Fulcrum, Inc. Rainy Day Bakeries Our Place Restaurants Beginning Balances Preliminary analysis Fieldwork $1,160 $2,670 710 1,980 Report development 1,020 $2,150 3,460 420 Costs During March Preliminary analysis Supplies Labor: hours dollars $ 710 $ 430 $ 200 60 10 12 $1,200 $ 200 $ 240