Question

Halifax Architectural Consultants (HAC) began operations on January 2. The following activity was recorded in the company’s work-in-process account for the first month of operations:

Work in Process
Costs of subcontracted work	$520,000	To completed projects	$890,000
Direct staff costs	187,440
Studio overhead	234,300

HAC is a service firm; thus, the names of its accounts differ from those used in manufacturing firms. Costs of subcontracted work are basically the same as direct materials; direct staff costs are the same as direct labour, studio overhead is the same as manufacturing overhead, and completed projects are the same as finished goods. Apart from the difference in terms, the accounting methods used by the company are identical to the methods used by manufacturing companies.

HAC uses a job-order costing system, applying studio overhead to work in process on the basis of direct staff costs. At the end of January, only one job (Labrador Gardens Project) was still in process; it was charged with $4,000 in direct staff costs.

2. Complete the following job cost sheet for the partially completed Labrador Gardens Project:

LABRADOR GRADENS PROJECT

JOB COST SHEET

AS OF JANUARY 31

Cost of subcontracted work:

Direct staff costs:

Studio overhead:

Total cost to January 31:

Answer 1

2)
Predetermined overhead rate     =   Studio overhead / Direct staff costs     =    $ 234,300 / $ 187,440	125%
LABRADOR GRADENS PROJECT JOB COST SHEET AS OF JANUARY 31
Cost of subcontracted work: ( $ 51,740 (-) $ 4,000 (-) $ 5,000 )	$ 42,740
Direct staff costs:	$ 4,000
Studio overhead: ( $ 4,000 x 125% )	$ 5,000
Total cost to January 31	$ 51,740
Particulars	Amount (in $ )
Costs of Subtracted work	$ 520,000
Add: Direct staff costs	$ 187,440
Add: Studio overhead	$ 234,300
Less: Completed projects	($ 890,000 )
Total cost to January 31	$ 51,740