Module Four Problem Set

Question 4 of 13

1.13 / 4

Joseph & Jordan, a consulting firm, specializes in providing internal audit services for its clients. It bills the clients $159 per hour for its professional services; it costs the firm $84 per hour to cover the cost of its staff. To cover its MOH costs, the partners have always applied MOH costs to clients based on total direct labor hours. At the beginning of the year, they budgeted for 8,400 direct labor hours and $158,760 of MOH costs. In the current year, the firms professional staff worked on three key client projects: All Ways, Inc., for 2,900 hours; My Way, Inc., for 2,400 hours; and High Way, Inc., for 4,600 hours. These clients were billed for this work by the end of the year. Naturally, there were other costs incurred to run the firm, including sales and marketing costs, which added up to $129,000 this year. Actual MOH costs for the year totaled $139,000.

(a)

Your answer is partially correct.

Show the effects of the labor and MOH costs through T-accounts for the companys inventory and Cost of Sales accounts. (For balances beginning/ending in 0 select "Beg. Bal." and "End Bal." for the date and 0 for the amounts for the balance of the account.)

WIP Inventory
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases

FG Inventory
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases

Cost of Sales
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases
Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases		Applied OHBeginning balanceCost of finished jobsCost of salesDepreciationDLDM usedEnd balancePurchases

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(b)

Prepare an income statement for the firm for the current year.

SG&A ExpensesGross ProfitDirect Materials UsedOperating Income/(Loss)SalesManufacturing Overhead AppliedDirect LaborCost of Sales		$
Gross ProfitDirect LaborSG&A ExpensesOperating Income/(Loss)Manufacturing Overhead AppliedCost of SalesDirect Materials UsedSales
SG&A ExpensesCost of SalesGross ProfitManufacturing Overhead AppliedDirect LaborDirect Materials UsedOperating Income/(Loss)Sales
Manufacturing Overhead AppliedDirect LaborDirect Materials UsedGross ProfitOperating Income/(Loss)SG&A ExpensesSalesCost of Sales

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(c1)

Determine the gross margin percentage and the profit margin percentage. (Round answers to 2 decimal places, e.g. 52.75%.)

Gross margin percentage		%
Profit margin percentage		%

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