This problem continues the Davis Consulting, Inc. situation from Problem. Recall that Davis allocated indirect costs to jobs based on a predetermined overhead allocation rate, computed as a percentage of direct labor costs. Because Davis provides a service, there are no direct materials costs. Davis 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 $ 180 per hour.
2. Is the job cost greater or less than that computed in Problem for each job? Why?
3. If Davis wants to earn an operating income equal to 25% of the total cost, how much (what fee) should it charge each of these twoclients?

Budgeted Cost of Activity $350,000 550,000 288,000 Predetermined Overhead Allocation Rate Activity Designing Programming Testing Allocation Base Number of designs Number of direct labor hours Number of tests 7,000 110 3,500 Total Travel and Meal Costs Total Number of Designs Total Direct Labor Hours 730 300 Total Number of Tests Job Tommys Trains Marcia's Cookies 13,600 600