McKenna Collins LLP public accounting firm employs 10 full-time professionals who provide services to clients. All professional labour compensation is traced directly to clients on a per professional labour-hour basis. Any other costs are included in a single indirect-cost pool (same as overhead) and allocated to individual clients according to billable professional labour-hours.

Operating costs and data for the year included the following:

EstimatedActual

OVERHEAD (indirect) costs$100000$1200000

Number of billable professional labour hours4000050000

Total professional compensation750000750000

Required:

a. By how much, if any, was the overhead cost underapplied or overapplied? (4 Marks)

b. Prepare a summary journal entry to close any underapplied or overapplied overhead cost to a Cost of Services Provided account. (2 Marks)

c. Explain qualitatively and quantitatively (in as much detail as possible) the source(s) of any underapplied or overapplied overhead cost.(4 Marks)