Bluebird Design, Inc. is a Web site design and consulting firm. The firm uses a job order costing system in which each client is a different job. Bluebird Design assigns direct labor, licensing costs, and travel costs directly to each job. It allocates indirect costs to jobs based on a predetermined overhead allocation rate, computed as a percentage of direct labor costs.

At the beginning of 2018, managing partner Sally Simone prepared the following budget estimates:

Direct labor hours (Professionals)	7,500 hours
Direct labor costs (Professionals)	\(1,500,000
Support staff salaries	464,000
Computer leases	45,000
Office supplies	29,000
Office rent	62,000

In November 2018, Bluebird Design served several clients. Records for two clients appear here:

	Delightful treats	Melva chocolates
Direct labor hours	500 hours	400 hours
Software licensing costs	\)3,500	$200
Travel costs	5,000	0

Requirements

1. Compute Bluebird Design’s direct labor rate and its predetermined overhead allocation rate for 2018.

2. Compute the total cost of each job.

3. If Simone wants to earn profits equal to 50% of service revenue, what fee should she charge each of these two clients?

4. Why does Bluebird Design assign costs to jobs?