P20-6 Job order costing in a service company [20-25 min) Skylark Design is a website design and consulting firm. The firm uses a job order costing system in which each client is a different job. Skylark Design traces direct labour, licensing costs and travel costs directly to each job. It allocates indirect costs to jobs based on a predetermined overhead allocation rate, calculated as a percentage of direct labour costs. At the beginning of 2016, managing partner Judy Jacquin prepared the following budget estimates: Direct labour hours (professionals) Direct labour costs (professionals) Support staff salaries Computer leases Office supplies Office rent 8 000 hours $2 000 000 664 000 47 000 23 000 66 000 In November 2016, Skylark Design served several clients. Records for two clients appear here: Direct labour hours Software licensing costs Travel costs Food Co-op 900 hours $3 500 11 000 Martin Chocolates 100 hours $100 Requirements 1 Calculate Skylark Design's direct labour rate and its predetermined overhead cost allocation rate for 2016. 2 Calculate the total cost of each job. 3 If Judy wants to earn profits equal to 50% of service revenue, what fee should she charge to each of these two clients? 4 Why does Skylark Design assign costs to jobs? P20-6 Job order costing in a service company [20-25 min) Skylark Design is a website design and consulting firm. The firm uses a job order costing system in which each client is a different job. Skylark Design traces direct labour, licensing costs and travel costs directly to each job. It allocates indirect costs to jobs based on a predetermined overhead allocation rate, calculated as a percentage of direct labour costs. At the beginning of 2016, managing partner Judy Jacquin prepared the following budget estimates: Direct labour hours (professionals) Direct labour costs (professionals) Support staff salaries Computer leases Office supplies Office rent 8 000 hours $2 000 000 664 000 47 000 23 000 66 000 In November 2016, Skylark Design served several clients. Records for two clients appear here: Direct labour hours Software licensing costs Travel costs Food Co-op 900 hours $3 500 11 000 Martin Chocolates 100 hours $100 Requirements 1 Calculate Skylark Design's direct labour rate and its predetermined overhead cost allocation rate for 2016. 2 Calculate the total cost of each job. 3 If Judy wants to earn profits equal to 50% of service revenue, what fee should she charge to each of these two clients? 4 Why does Skylark Design assign costs to jobs