Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 442 hours for Massive Airframes and 667 hours for Gigantic Drydocks. AB bills clients at the rate of $520 per hour; labor cost for its professional staff is $210 per hour. Overhead costs in March totaled $40,280. Overhead is applied to clients at $41 per labor-hour. In addition, AB had $199,500 in marketing and administrative costs. All transactions are on account. All services were billed.

TransactionDescription

(a)Record Labor cost

(b)Record Applied Service Overhead

(c)Record Cost of services billed

(d)Record Actual Service Overhead

Required:

a. Show labor and overhead cost flows through T-accounts.

b. Prepare an income statement for the company for March.

Wages Payable Work-In-Process Beg. bal Beg. bal. End. bal End. bal. Cost of Services Billed Service Overhead Control Beg. bal. Beg. bal. C End. bal End. bal. Applied Service O.H. Beg. bal End. bal. ALLOCATION BUSTERS Income Statement For the Month Ended March 31