Question

Prepare an income statement for the company for August For August, Royal Consulting and Mediation Practice (RCMP) worked 900 hours for Alberta Company and 2,100 hours for Ontario Corporation. RCMP bills clients at the rate of $400 per hour; labor cost for its consulting staff is $200 per hour. The total number of hours worked in August was 3,000, and overhead costs were $60,000. Overhead is applied to clients at $24 per labor-hour. In addition, RCMP had $240,000 in marketing and administrative costs. All transactions are on account. All services were billed

Answer 1

Answer:

Prepare an income statement for the company for August

Revenue (3000×$400)                                                                     1,200,000

Less Cost of Sales

Labour Cost for Consulting Staff (3000×$200)       600,000

Overheads                                                                    72,000

Less Over Applied Overheads                                     12,000          660,000

Gross Profit                                                                                          540,000

Less Operating Expenses

Markerting and Administrative Costs                                                240,000                          

Net Income                                                                                          300,000

Explanation:

Net Income = Sales - Cost of Sale - Operating Expenses

Cost of Sales in the case of RCMP involves the cost of providing a service for each of their clients.