Thomas Design is an interior design firm. The firm uses a job cost system, in which each client is a different job. Thomas Design traces direct labor, licensing costs, and travel costs directly to each job (client). 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 the current year, managing partner Josefina Miracle prepared the following budget:

Later that same year in November, Thomas Design served several clients. Records for two clients appear here:

Requirements:

1. Compute Thomas 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 Thomas Design wants to earn profits equal to 30% of sales revenue, how much (what total fee) should the company charge each of these two clients?
4. Why does Thomas Design assign costs to jobs?

Transcribed Image Text:

Direct labor hours (professional) Direct labor costs (professional) Support staff salaries Computer leases 10,000 hours $1,400,000 $ 170,000 $ 49,000 Office supplies Office rent $ 29,000 EA $ 60,000