Exercise 7-42 (Algo) Job Costing in a Service Organization (LO 7-4)

Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 447 hours for Massive Airframes and 669 hours for Gigantic Drydocks. AB bills clients at the rate of $510 per hour; labor cost for its professional staff is $210 per hour. Overhead costs in March totaled $41,180. Overhead is applied to clients at $41 per labor-hour. In addition, AB had $198,400 in marketing and administrative costs. All transactions are on account. All services were billed.

Transaction	Description
(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