PelicanAds.com is an internet advertising agency. The firm uses a job cost system in which each client is a different €œjob.€ PelicanAds.com traces direct labour, software licensing costs, and travel costs directly to each job (client). The company allocates indirect costs to jobs based on a predetermined indirect cost allocation rate computed as a percentage of direct labour costs.

At the beginning of the current year, managing partner Ricky Beuna prepared a budget:

Direct labour hours (professional)............................................ 8,000 hours

Direct labour costs (professional)............................................. $1,600,000

Support staff salaries................................................................ 190,000

Rent and utilities...................................................................... 41,000

Supplies.................................................................................... 23,000

Lease payments on computer hardware.................................... 66,000

During January of the current year, PelicanAds.com served several clients. Records for two clients appear here:

Requirements
1. Compute PelicanAds.com€™s predetermined indirect cost allocation rate for the current year based on direct labour hours.
2. Compute the total cost of each job.
3. If PelicanAds.com 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 PelicanAds.com assign costs to jobs?

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Port Adak Golf Resort AllVacations.com Direct labour hours 760 hours 50 hours S150 $2,000 $9,000 ravel costs..