Environmental Business Consultants, LLC (EBC), is a consulting firm that specializes in the areas of recycling and solid waste and water/wastewater management services. The firm has offices located in northern and southern California. EBC has serviced hundreds of municipal agencies since 1984. Both the firm’s executives and consultants work on client projects. EBC’s 2019 adjusted trial balance is shown below.

Required 1. Classify each of the expense line items in the trial balance as:

a. Direct or indirect. Assume that the cost object is a consulting project.

b. Fixed or variable. Assume that the cost object is one of EBC’s two offices.

c. Product or period. Assume that the cost object is a consulting project. 

2. Prepare a schedule of cost of services for EBC for the year ended December 31, 2019. Assume that the beginning Work-in-Process Inventory balance was  \($223,000.\) Regardless of your classification in requirement |, assume that all executive and consultant
salaries, benefits, and taxes are product costs and that EBC treats all bonuses
and continuing education expenses as period costs.

3. Prepare an income statement for EBC for the year ended December 31, 2019.

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Trial Balance Description Debit Credit Cash...... 390,000 Accounts receivable. 474,000 Allowance for uncollectible accounts Work-in-process inventory 247,000 Other current assets... 32,000 Furniture and fixtures. 150,000 Accumulated depreciation-furniture. 150,000 Noncurrent liabilities. Office equipment Accumulated depreciation-equipment Accounts payable.. Other current liabilities Owners' capital.. Retained earnings Sales.. Reimbursable costs Executive salaries. Clerical salaries.. Consultant salaries. 277,000 198,000 37,500 3,000 90,000 573,000 4,146,000 431,000 844,500 217,500 1,050,000 Employee benefits 145,500 Payroll taxes.. 123,000 Employee bonuses. 126,000 Marketing expenses. 48,000 Employee continuing education expenses. 27,000 Office lease expense 202,500 Office supplies expense. 64,500 Other general administrative expenses 355,500 Other income/(expense). 7,500 5,205,000 5,205,000