Question
Marsha Design is an interior design and consulting firm. The firm uses a job order cost system in which each client represents an individual job.
Marsha Design is an interior design and consulting firm. The firm uses a job order cost system in which each client represents an individual job. Marsha Design traces direct labor and travel costs to each job (client). It assigns indirect costs to clients at a predetermined overhead rate based on direct labor hours. At the beginning of the year, the managing partner, Marsha Cain, prepared the following budget: Direct labor hours (professional) 5,400 Direct labor costs (professional) $ 540,000 Indirect costs: Support staff salaries $ 73,600 Office rent 59,000 Office supplies 24,000 Total expected indirect costs $ 156,600 Later that same year, in March, Marsha Design served several clients. Records for two clients appear below: Oliverio McComb Direct labor cost (professional) $ 4,400 $ 3,400 Travel costs 600 200 Direct labor hours 44 hours 34 hours Required: Compute Marsha Designs predetermined overhead rate for the current year. Compute the total cost of serving the clients listed. Assume that Marsha charges clients $210 per hour for interior design services. How much gross profit would she earn on each of the clients above, ignoring any difference between actual and applied overhead?
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