Use job costing at a consulting firm (Learning Objective 6)

WB Design is a Web site design and consulting firm. The firm uses a job cost system in which each client is a different “job.” WB Design traces direct labor, licensing costs, and travel costs directly to each job (client). It allocates indirect costs to jobs based on a pre¬ determined indirect cost allocation rate computed as a percentage of direct labor costs.

At the beginning of 2008, managing partner Mary Milici prepared the following budget:

In November 2008, WB Design served several clients. Records for two clients appear here:

Requirements 1. Compute WB Design’s predetermined indirect cost allocation rate for 2008.
2. Compute the total cost of each job.
3. If Milici wants to earn profits equal to 20% of sales revenue, how much (what total fee) should she charge each of these two clients?
4. Why does WB Design assign costs to jobs?

Transcribed Image Text:

Direct labor hours (professional)......... Direct labor costs (professional).. Support staff salaries............. Computer lease payments............ Office supplies. Office rent....... 8,000 hours $1,000,000 80,000 46,000 25,000 49,000