Question

WB Design is a website design and consulting firm. The firm uses a job cost system in which each client is a different “job.” WB Design traces direct labour, licensing costs, 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 labour costs.
At the beginning of the current year, managing partner Mary Milici prepared the following budget:
Direct labour hours (professional)..................................................... 8,000 hours
Direct labour costs (professional)...................................................... $1,000,000
Support staff salaries......................................................................... 80,000
Computer lease payments.................................................................. 46,000
Office supplies................................................................................... 25,000
Office rent......................................................................................... 49,000
Later that same year in November, WB Design served several clients. Records for two clients appear here:
Requirements
1. Compute WB Design’s predetermined indirect cost allocation rate for the current year.
2. Compute the total cost of each of the two jobs listed.
3. If Milici wants to earn profits equal to 20% of sales revenue, how much (what total fee) should she charge each of these two clients?
4. Why does WB Design assign costs to jobs?


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  • CreatedApril 30, 2015
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