MY-REE Co. provides consulting services and uses a job-order system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by MY-REE, 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.

MY-REE anticipates the following costs for the upcoming year:

Cost Percentage of Cost Directly Traceable to Clients

Professional Staff Salaries $5 million 80%

Administrative support staff $600,000 50%

Travel $200,000 80%

Other operating costs $200,000 20%

MY-REEs partners desire to make a $480,000 profit for the firm and plan to add a percentage markup on cost to achieve that figure.

On May 14, MY-REE completed work on a project for Lawson Manufacturing. The following costs were incurred: professional staff salaries $68,000; administrative support staff $8,900; travel $10,500 and other operating costs $2,600.

You are required to:

1. Determine MY-REEs total traceable costs for the upcoming year and the firms total anticipated overhead.
2. Calculate the predetermined overhead rate. The rate is based on total costs traceable to client jobs.
3. What percentage of cost will MY-REE add to each job to achieve its profit target?
4. Determine the total cost of Lawson Manufacturing project. How much would Lawson be billed for services performed?