This problem continues the Draper Consulting, Inc., situation from Problem 17-35 of Chapter 17. Recall that Draper allocated indirect costs to jobs based on a predetermined indirect cost allocation rate, computed as a percentage of direct labor costs. Because Draper provides a service, there are no direct materials costs. Draper is now considering using an ABC system. Information about ABC costs follows:

Records for two clients appear here:

Requirements
1. Compute the total cost of each job.
2. Is the job cost greater or less than that computed in Problem 17-35 for each job? Why?
3. If Draper wants to earn gross profit equal to 25% of cost, how much (what fee) should it charge each of these twoclients?

Budgeted Cost Cost Allocation Rate Allocation Base Number of designs Direct labor hours Number of tests of Activity 350,000 Activity Design 7,000 110 Programming Testing 550,000 288,000 3,500