Job order cost accounting for a service company The Fly Company provides advertising services for clients across the nation. The Fly Company is presently working on four projects, each for a different client. The Fly Company accumulates costs for each account (client) on the basis of both direct costs and allocated indirect costs. The direct costs include the charged time of professional personnel and media purchases (air time and ad space). Overhead is allocated to each project as a percentage of media purchases. The predetermined overhead rate is 50% of media purchases. On August 1, the four advertising projects had the following accumulated costs: August 1 Balances Vault Bank $69,900 Take Off Airlines 21,000 Sleepy Tired Hotels 48,900 Tastee Beverages 30,100 Total $169,900 During August, The Fly Company incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts: Direct Labor Media Purchases Vault Bank $47,400 $180,500 Take Off Airlines 21,100 158,800 Sleepy Tired Hotels 93,200 116,000 Tastee Beverages 106,000 86,700 Total $267,700 $542,000 At the end of August, both the Vault Bank and Take Off Airlines campaigns were completed. The costs of completed campaigns are debited to the cost of services account. a. Journalize the summary entry to record the direct labor costs for the month. a. Work in Process V VI 267,700 VI Salaries Payable v V' 267,700 J Feedback " Check My Work a. Increase the work in process for the direct costs and the applied overhead. Applied overhead should be based on media purchases. Transfer the cost of completed jobs out of work-in-process and into the cost of services account. b. Journalize the summary entry to record the media purchases for the month. b. Work in Process v J ~/ Accounts Payable v J 542,000 J c. Journalize the summary entry to record the overhead applied for the month. c. Work in Process v V C] X ~/ Agency Overhead v C] Feedback " Check My Work c. Increase the work in process for the direct costs and the applied overhead. Applied overhead should be based on media purchases. Transfer the cost of completed jobs out of work-in-process and into the cost of services account. d. Journalize the summary entry to record the completion of Vault Bank and Take Off Airlines for the month. d. Cost of Services V J C] Work in Process V J C]