Advertising.net is an internet advertising agency. The firm uses a job costing system in which each client is a different job. Advertising.net traces direct labour, software licensing costs and travel costs directly to each job. It allocates indirect costs to jobs based on a predetermined overhead rate computed as a percentage of direct labour costs.

At the beginning of the current year, managing partner Richard Latour prepared the following budget:

Direct labour hours (professional) 17,500 hours

Direct labour costs (professional) $1,750,000

Support staff salaries $305,000

Rent and utilities $ 95,000

Supplies $ 15,000

Lease payments on computer hardware $285,000

During January of the current year, 2023, Advertising.net served several clients. Records for two clients appear as follows:

GoVacation.com Harbour Golf resort

Direct labour hours 460 hours 40 hours

Software licensing costs $1,490 $280

Travel costs $ 9,000 $0

Required:

1. Compute Adversiting.nets predetermined indirect cost allocation rate for the current year based on direct labour hours.
2. Compute the total cost of each of the two jobs listed.
3. If Advertising.net 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 Advertising.net assign costs to jobs?