1. Cost Flows in a Service Organization. For the month of September, Touche Young & Company, an accounting firm, worked 200 hours for Client A and 700 hours for Client B. Touche Young bills clients at the rate of $80 per hour and pays the audit staff at the rate of $30 per hour. The audit staff worked 1,000 total hours in September, including 100 hours not billable to clients. (Examples of unbillable hours are hours spent in professional training and meetings unrelated to particular clients.) Overhead costs were $10,000. The firm assigned overhead as follows: Client A, $2,000; Client B, $7,000; and $1,000 unassigned. In addition, Touche Young & Company spent $5,000 in marketing and administrative costs. All transactions are on account. The firm has billed to the clients all work done in September.

a. Using T-accounts, show costs and revenue flows. b. Prepare income statement for the company for September.