Job order costing

Jacks Ltd is a boutique consulting company providing consulting services in supply chain management. They pay their consultants at the rate of $50 per hour worked. When projects are completed, they bill their clients $100 per hour charged to a project by a consultant. Costs related to client projects are accumulated/collected using a job order (project accounting) system. UPS/Fed Ex Delivery costs, travel expenses, supply costs and consultants wages (paid at $50 per hour) are assigned directly to client projects (jobs) while administrative support costs (personal assistants, rent, telecommunication costs and other related overhead costs) are assigned (allocated) to projects (jobs). The budgeted annual indirect costs are estimated to be $1,200,000. It is expected that the labor hours for the coming year are to be 40,000 hours. Assume all payment transactions except wages are in cash.

Activity for March

1. Calculate the overhead allocation rate using a normal costing methodology.
2. There was $30,000 in the cash account at the beginning of March
3. At the beginning of March, Jacks Ltd owed $5,000 in wages payable to consultants for previous months work
4. Job 115 had a balance of $5,000 at the beginning of March (This balance includes 30 hours of billable time plus other direct costs charged to the job)
5. Job 115 was completed in March.
6. Job 116 was started and completed in March while Job 117 was started but not completed.
7. During March, Jacks Ltd consultants worked 200 hours. This time was charged to the following jobs – Job 115, 60 hours; Job 116, 100 hours, and Job 117, 40 hours.
8. Jacks Ltd paid the previous months consultants wages of $5,000 from February and $8,000 for worked performed in the current month in March.
9. Jacks Ltd had delivery and travel expenses as follows: Job 115, $2,500, Job 116, $9,000, and Job 117, $3,000. These were all paid in cash.
10. Jacks Ltd paid administrative staff $3,000 for March.
11. For March, utilities were $1,200 and were paid in cash in March.
12. March rent was $1,500 and was paid in cash in March.
13. Overhead is assigned for March.

Using a job costing methodology and assuming all expenses except as noted (unpaid wages) are paid in cash and revenues are recorded in accounts receivable perform the following:

1. Create T –Accounts for each job (posting any appropriate beginning balances), an overhead control account as well as other needed general ledger accounts (cash for instance)
2. Record the Post the above transactions to the appropriate T accounts (number your entries)
3. Prepare required journal entries (with proper descriptions with reference to your T-accounts) for March
4. Calculate ending Work in Process, Cost of Services and Sales Revenue. Using this information prepare an income statement in good form.

You need to be specific about what you need to know

You are asked to prepare journals, post the entries in each job account, and determine certain balances. This isn't, in essence, any different to any other accounting function, you have just been asked to interpret some additional data