This problem continues the Draper Consulting, Inc., situation from Problem 16-35 of Chapter 16. Draper Consulting uses a job order costing system in which each client is a different job. Draper traces direct labor, daily per diem, and travel costs directly to each job. It allocates indirect costs to jobs based on a predetermined indirect cost allocation rate, computed as a percentage of direct labor costs. At the beginning of 2013, the controller prepared the following budget:

Direct labor hours (professional) . . . . . . 5,500 hours

Direct labor costs (professional) . . . . . . . . $990,000

Support staff salaries . . . . . . . . . . . . . . . . . 105,000

Computer leases . . . . . . . . . . . . . . . . . . . . . . 48,000

Office supplies . . . . . . . . . . . . . . . . . . . . . . . 15,000

Office rent . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000

In November 2013, Draper served several clients. Records for two clients appear here:

Requirements
1. Compute Draper's predetermined indirect cost allocation rate for 2012.
2. Compute the total cost of each job.
3. If Draper wants to earn profits equal to 25% of sales revenue, how much (what fee) should it charge each of these two clients?
4. Why does Draper assign costs tojobs?

Transcribed Image Text:

Marcia's Tommy's Trains Cookies 300 hours $ 600 Direct labor hours Meal-per diem Travel costs 730 hours 2,600 11,000