Business, 13.02.2020 23:28 nsbegay2007

Sierra Design is an interior design firm. The firm uses a job cost system in which each client is a different "job." Sierra 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.

Direct labor hours (professional)………………………….. 17,100 hours
Direct labor costs (profession…………………………….. $2,052,000
Support staff salaries ……………………………………… $ 160,000
Rent and utilities……………………………………………… $ 48,000
Supplies ………………………………………………….. $ 461,300
Lease payments on computer hardware ………………….. $ 66,000
During January of the current year, Anderson & Little served several clients. Records for two clients appear here:
DreamVacation. com Port Armour Golf Resort
Direct labor hours…………….. 750 hours 30 hours
Software licensing costs…………….. $2,500 $150
Travel costs ……………………………….. $8,000 $ 0
Requirements
1. Compute Anderson & Little’s predetermined indirect cost allocation rate for the current year based on direct labor hours.
2. Compute the total cost of each job.
3. If Anderson & Little wants to earn profits equal to 20% of sales revenue, how much (what total fee) should it charge each of these two clients?
4. Why does Anderson & Little assign costs to jobs?

Answers: 2

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Sierra Design is an interior design firm. The firm uses a job cost system in which each client is a...

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