
Concept explainers
(a)
The job order cost accounting system is also used by service business. But the usage of job order cost system by service business for the service provided to the business. The service business which is using job order costing provides services which are unique to each customers with related costs that are very importance with each customer.
To record:
(a)

Answer to Problem 15E
The journal entries for each transaction is prepared as follows:
Date | Account titles and Explanation | Debit ($) | Credit ($) | |||||
July | 03 | Work in process (175 hours × $150) | 26,250 | |||||
Salaries Payable | 26,250 | |||||||
(Record charges for professional services) | ||||||||
July | 10 | Work in process | 12,500 | |||||
Cash | 12,500 | |||||||
(Record reimbursement of travel costs) | ||||||||
July | 14 | Work in process (260 hours × $185) | 48,100 | |||||
Salaries Payable | 48,100 | |||||||
(Record professional charges) | ||||||||
July | 18 | Work in process | 30,000 | |||||
Consultant fees payable | 30,000 | |||||||
(Record invoice for expert testimony) | ||||||||
July | 27 | Work in process (435 hours × $62) | 26,970 | |||||
Office |
26,970 | |||||||
(Record factory overhead applied) | ||||||||
July | 31 | Office overhead | 28,500 | |||||
Cash | 28,500 | |||||||
(Record administrative and support salaries paid) | ||||||||
July | 31 | Office overhead | 4,000 | |||||
Supplies | 4,000 | |||||||
(Record office supplies used) | ||||||||
July | 31 | Salaries payable | 74,350 | |||||
Cash | 74,350 | |||||||
(Record payment of professional salaries) | ||||||||
July | 31 | 172,500 | ||||||
Fees earned | 172,500 | |||||||
(Record payment of professional salaries) | ||||||||
July | 31 | Cost of services (1) | 143,820 | |||||
Work in process | 143,820 | |||||||
(Record cost of services for the month) |
Table (1)
Explanation of Solution
Working note:
The cost of services is calculated as follows:
(b)
To calculate: if the factory overhead is under-applied or over-applied.
(b)

Answer to Problem 15E
The under (or) over applied overhead is calculated as follows:
Particulars | Amount ($) |
Office overhead incurred (2) | 32,500 |
Less: Office overhead applied | 26,970 |
Underapplied overhead | 5,530 |
Table (2)
Explanation of Solution
Working note:
The overhead incurred is calculated as follows:
The factory overhead is under applied by $5,530.
(c)
gross profit for the service provided for O case.
(c)

Answer to Problem 15E
Answer:
The gross profit is calculated as follows:
Particulars | Amount ($) |
Fees earned | 172,500 |
Less: Cost of services (2) | 149,350 |
Gross Profit | 23,150 |
Table (3)
Explanation of Solution
Working note:
The cost of services is calculated as follows:
Gross profit for the service is $23,150.
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Chapter 2 Solutions
Managerial Accounting, Loose-leaf Version
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