Business, 08.02.2021 18:40 thruhdyjgrt

Design is an interior design firm. The firm uses a job cost system in which each client is a different "job." 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) . . . . . . . 10,000 hours
Direct labor costs (professional) . . . . . . . $1,300,000
Support staff salaries . . . . . . . . . . . . . . . . $160,000
Computer lease payments. . . . . . . . . . . . $48,000
Office supplies . . . . . . . . . . . . . . . . . . . . . $28,000
Office rent. . . . . . . . . . . . . . . . . . . . . . . . . $63,000

Delightful Dining DineNow. com
Direct labor hours . . . . . . . . . . 730 hours 35 hours
Licensing costs . . . . . . . . . . . . $2,500 $150
Travel costs . . . . . . . . . . . . . . . $6,000 $0

Requirements
a. Compute Sierra Design's predetermined indirect cost allocation rate for the current year.
b. Compute the total cost of each of the two jobs listed.
c. If Sierra Design wants to earn profits equal to 20% of sales revenue, how much (what total fee) should the company charge each of these two clients?
d. Why does Sierra Design assign costs to jobs?

Answers: 3

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