JLR Enterprises provides consulting services throughout California and uses a job-order costing system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by JLR, but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, overhead, and a markup.

JLRs director of cost management, Victor Anthony, anticipates the following costs for the upcoming year:

TypeCostPercentage of Cost Directly Traceable to ClientsProfessional staff salaries$ 2,500,00080%Administrative support staff300,00060%Travel250,00090%Photocopying50,00090%Other operating costs100,00050%Total$ 3,200,000

The firms partners desire to make a $640,000 profit for the firm and plan to add a percentage markup on total cost to achieve that figure.

On March 10, JLR completed work on a project for Martin Manufacturing. The following costs were incurred: professional staff salaries, $46,000; administrative support staff, $3,600; travel, $6,500; photocopying, $1,500; and other operating costs, $2,400.

6. Notice that 80 percent of the professional staff cost is directly traceable to specific client projects. Cite several reasons that would explain why this figure isnt 100 percent.

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• Compensation for attending training sessions
• Consulting fees
• Compensation for attending firm-wide planning meetings
• Paid vacations
• Manufacturing overhead
• Product cost
• Completion of general non-client-related paperwork and reports