General ledger relationships, under- and overallocation, service industry.John Brody and Co. is an engineering consulting firm. Brody uses a variation of a normal-costing system. It charges jobs for blueprints made and fees paid to outside experts at actual costs, profes¬

sional direct-labour costs at a budgeted direct-labour rate, and engineering support overhead costs (for engineering and office support) at a budgeted indirect-cost rate. JOB COSTING 149 Brody maintains a Jobs-in-Process Control account in its general ledger that accumu¬

lates all costs ofjobs. As a job is completed, Brody immediately bills the client and transfers the costs of the completed job to the Cost ofJobs Billed account to be matched against the revenues billed to the client. Consequently, unlike manufacturing companies, Brody has no accounts that correspond to Materials Control and Finished Goods Control accounts.

The following data pertain to the year 2007:

Cost ofjobs in process on 1—1—2007 $240,000 Direct costs offees and blueprints (all cash) $180,000 Actual direct professional labour costs (all cash) $1,800,000 Direct professional labour allocated at $60 per direct professional labour-hour ?

Actual direct professional labour-hours 29,000 Actual engineering support overhead costs (all cash) $1,416,000 Engineering support overhead allocated at $0.80 per direct professional labour dollar ?

Cost ofjobs billed $3,000,000 Revenues $3,360,000 Brody incurs no marketing and business development costs.

Required 1. Summarize the year 2007 transactions by preparing T-accounts forJobs-in-Process Control, Cost of Jobs Billed, Direct Professional Labour Control, Direct Professional Labour Allocated, Engineering Support Overhead Control, Engineering Support Overhead Allocated, and Cash Control. As your final entry, dispose ofthe year-end under- or overallo¬

cated account balances as a direct write-offto Cost of Goods Sold.

2. Calculate Brody’s operating income for the year 2007.