4. Job costing in a service business Diego, Hyatt, and Stevens, a prestigious law firm located in San Antonio, uses a job order system to monitor the cost of servicing clientele. The office manager has prepared the following budget for 20X7: $11,520,000 $6,000,000 2,000,000 Client billings Less: Professional staff costs (85%) Administrative staff costs (75%) Computer time (80%) Photocopying (70%) Other office costs (20%) 500,000 200,000 300,000 9,000,000 $ 2,520,000 Net income The numbers in parentheses indicate the percentage of cost that is directly traceable to client jobs. The remaining, nontraceable portion is charged to clients by using a predetermined overhead application rate. The office manager feels that total direct cost is the most appropriate overhead application base. In March, the firm completed work on a suit for Picante Foods. The following costs were directly chargeable to Picante: Aa 419 Instructions a. Determine the firm's total budgeted traceable and nontraceable costs and the overhead application rate. b. Calculate the firm's estimated income for the year as a percentage of traceable cost c. Compute the total cost of the Picante job and the amount that Diego, Hyatt, and Stevens would bill the client. d. The office manager can acquire new software that would allow the firm to increas the percentage of direct (as opposed to indirect) costs. Briefly explain why Diego, Hyatt, and Stevens would be interested in this software. Instructions a. Determine the firm's total budgeted traceable and nontraceable costs and the overhead application rate. b. Calculate the firm's estimated income for the year as a percentage of traceable costs. c. Compute the total cost of the Picante job and the amount that Diego, Hyatt, and Stevens would bill the client. d. The office manager can acquire new software that would allow the firm to increase the percentage of direct (as opposed to indirect) costs. Briefly explain why Diego, Hyatt, and Stevens would be interested in this software