Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 26

Job Costs in a Service Company

On September 1, two jobs were in process at Pete’s Patios. Details of the jobs follow:

Job Number	Direct Materials	Direct Labor
PP-24	$2,038	$ 768
PP-30	1,280	3,360

Materials Inventory on September 1 totaled $11,040, and $1,392 worth of materials was purchased during the month. Indirect materials of $192 were withdrawn from materials inventory. On September 1, finished goods inventory consisted of two jobs, PP-12, costing $4,704, and PP-14, with a cost of $1,896. Costs for both jobs were transferred to Cost of Services Billed during the month.

Also during September, Jobs PP-24 and PP-30 were completed. Completing Job PP-24 required an additional $2,720 in direct labor. The completion costs for Job PP-30 included $1,296 in direct materials and $8,000 in direct labor.

Pete’s Patios used a total of $3,768 of direct materials (excluding the $192 indirect materials) during the period, and total direct labor costs during the month amounted to $16,320. Overhead has been estimated at 50 percent of direct labor costs, and this relation has been the same for the past few years.

Required

Compute the costs of Jobs PP-24 and PP-30 and the balances in the September 30 inventory accounts.

Step 1 of 5

Compute the costs of jobs PP-24 and PP-30 and the lances in the September 30 inventory:

Accounts using T-accounts as follows:

Preparation of T-accounts

In general, a ledger is a book or a complete record of financial transactions of a company. The term book of accounts is more generic and refers to all the financial records, ledgers, and journals. But, ledger is given the most importance.

T Accounts – For all the business transactions, journal entries are passed and then, are transferred to the respective ledger accounts where it is recorded and summarized in either side of the ‘T’ format.