This problem continues the Daniels Consulting situation from Problem PI7-40 of Chapter 17. Recall that Daniels allocated indirect costs to jobs based on a predetermined overhead allocation rate, computed as a percentage of direct labor costs. Because Daniels provides a service, there are no direct materials costs. Daniels is now considering using an ABC system. Information about ABC costs follows:

Records for two clients appear here:

Requirements
1. Compute the total cost for each job. The cost of direct labor is $176 per hour.
2. Is the job cost greater or less than that computed in Problem PI7-40 for each job? Why?
3. If Daniels wants to earn an operating income equal to 25% of the total cost, how much (what fee) should it charge each of these two clients?

Budgeted Cost of Activity $20,000 50,000 25,000 Predetermined Overhead Allocation Rate Activity Designing Programming Testing Allocation Base Number of designs Number of direct labor hours Number of tests 1,350 25 500 Total Tra Total Number Total Direct Total Number and Meal Costs of Designs Labor Hours Job of Tests 720 Tommy's Trains Marcia's Cookies $10,700 600 4 200