Job costs in a service organization. Creative Designs, an advertising firm, uses job costing.

During March, the firm designed ads for two clients and billed those clients for the services performed. FastCheck Groceries was billed for $50,000 and Financial First was billed for $100,000. Direct labor costs were $25 per hour. Creative Designs worked 1 ,200 hours on the FastCheck job. and 2.000 hours on the Financial First job. The firm could not charge 300 hours to either job. The firm assigns overhead to jobs at the rate of $10 per billable hour. During March, the firm incurred actual overhead of $35,000. The firm incurred marketing and administrative costs of $10,000. All transactions were on account.

a. Show the flow of these revenues and costs through T-accounts.

b. Prepare an income statement for March like the one in Exhibit 2.5.