Allocation Busters $\backslash (($A B$)\backslash )$ is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked $440$ hours for Massive Airframes and $665$ hours for Gigantic Drydocks. AB bills clients at the rate of $\backslash (\backslash$$ $505\backslash )$ per hour; labor cost for its professional staff is $\backslash (\backslash$$ $220\backslash )$ per hour. Overhead costs in March totaled $\backslash (\backslash$$ $40,860\backslash ).$ Overhead is applied to clients at $\backslash (\backslash$$ $41\backslash )$ per labor$-$hour. In addition, AB had $\backslash (\backslash$$ $198,800\backslash )$ in marketing and administrative costs. All transactions are on account. All services were billed.

Transaction Description

$($a$)$ Record Labor cost

$($b$)$ Record Applied Service Overhead

$($c$)$ Record Cost of services billed

$($d$)$ Record Actual Service Overhead

Required:

a$.$ Show labor and overhead cost flows through T$-$accounts.

b$.$ Prepare an income statement for the company for March.

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Show labor and overhead cost flows through T$-$accounts.