Prepare a summary journal entry to close any underapplied

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Reference no: EM132509792

McKenna Collins LLP public accounting firm employs 10 full-time professionals who provide services to clients. All professional labour compensation is traced directly to clients on a per professional labour-hour basis. Any other costs are included in a single indirect-cost pool (same as overhead) and allocated to individual clients according to billable professional labour-hours.

Operating costs and data for the year included the following:

                                                                         Estimated                     Actual

OVERHEAD (indirect) costs                             $100000              $1200000

Number of billable professional labour hours          40000               50000

Total professional compensation                         750000              750000

Required:

Question a. By how much, if any, was the overhead cost underapplied or overapplied?

Question b. Prepare a summary journal entry to close any underapplied or overapplied overhead cost to a Cost of Services Provided account.

Question c. Explain qualitatively and quantitatively (in as much detail as possible) the source(s) of any underapplied or overapplied overhead cost.

Reference no: EM132509792

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