JLR Enterprises provides consulting services throughout California and uses a job-order costing system to accumulate the cost of client projects. Traceable costs are charged directly to individual client in contrast, other costs incurred by JLR. But not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are hilled for directly chargeable costs, overhead and a markup.

JLR’s director of cost management, Brent Dean, anticipates the following costs for the upcoming year:

The firm’s partners desire to make a $640,000 profit for the firm and plan to add a percentage markup on total cost to achieve that figure.
On March 10, JLR completed work on a project for Martin Manufacturing. The following costs were incurred: professional staff salaries, $41,000: administrative support staff, $2,600; travel. $4,500; photocopying, $500; and other operating costs, $1,400.

Required:
1. Determine JLR’s total traceable costs for the upcoming year and the firm’s total anticipated overhead.
2, Calculate the predetermined overhead rate. The rate is based on total costs traceable to client Jobs.
3. What percentage of cost will JLR add to each job to achieve its profit target?
4. Determine the total cost of the Martin Manufacturing project. How much would Martin be billed for services performed?
5. Notice that only 50 percent of JLR is other operating cost is directly traceable to specific client projects. Cite several costs that would be included in this category and difficult to trace to clients.
6. Notice that 80 percent of the professional staff cost is directly traceable to specific client projects. Cite several reasons that would explain why this figure is not 100percent.

Transcribed Image Text:

Percentage of Cost Direclly Traceable to Clients 80% 60% 90% 90% 50% Cost $2,500,000 Administrative support staff Travel Photcopying . Other operating cost1 300,000 250,000 50,000... 100,000. Total 3200,000