Question

Job Order Cost Accounting Entries for a Service Business Media Connect Inc. provides advertising services for clients across the nation. Media Connect is presently working on four projects, each for a different client. Media Connect 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 40% of media purchases. On April 1, the four advertising projects had the following accumulated costs:

April 1 Balances
First Bank $40,000
Reliable Airlines 18,000
Motel 26 33,000
Blue Mountain Beverages 27,000
During April, Media Connect incurred the following direct labor and media purchase costs related to preparing advertising for each of the four accounts:
Direct Labor Media Purchases
First Bank $115,000 $ 480,000
Reliable Airlines 84,000 320,000
Motel 26 110,000 200,000
Blue Mountain Beverages 125,000 300,000
At the end of April, both the First Bank and Reliable Airlines campaigns were completed. The costs of completed campaigns are added to the cost of services account. Determine each of the following for the month:
a. Direct labor costs.
b. Media purchases.
c. Overhead applied.
d. Cost of completed First Bank and Reliable Airlines campaigns.
Total Costs
First Bank $
Reliable Airlines $

Answer 1

A. $434,000

B. $1,300,000

C. $520,000

D. First bank $827,000

Reliable Airlines $550,000

Step-by-step explanation:

A. Calculation to determine the Direct labor costs.

Direct Labor

First Bank $115,000

Reliable Airlines 84,000

Motel 26 110,000

Blue Mountain Beverages 125,000

Total $434,000

B. Calculation to determine the Media purchases

Media Purchases

First Bank $ 480,000

Reliable Airlines 320,000

Motel 26 200,000

Blue Mountain Beverages 300,000

Total $1,300,000

C. Calculation to determine the Overhead applied

Overhead applied=$1,300,000*40%

Overhead applied=$520,000

D. Calculation to determine the Total cost for First bank and Reliable Airlines

First bank=$40,000+$115,000+$ 480,000+($ 480,000*40%)

First bank=$40,000+$115,000+$ 480,000+$192,000

First bank=$827,000

Reliable Airlines=$18,000+84,000+320,000+(320,000*40%)

Reliable Airlines=$18,000+84,000+320,000+$128,000

Reliable Airlines=$550,000

Therefore Total cost for is First bank $827,000 and Reliable Airlines is $550,000