Question
Sierra Design is an interior design firm. The firm uses a job cost system in which each ent is a different job.Sierra Design traces direct
Sierra Design is an interior design firm. The firm uses a job cost system in which each ent is a different "job.Sierra Design traces direct labor, licensing costs, and travel costs directly to each job (client). It allocates indirect costs to jobs based on a predetermined indirect cost allocation rate computed as a percentage of direct labor costs. At the beginning of the current year, managing partner Laurie Walker prepared the following budget : 10,000 hours 1,100,000 Direct labor hours ( professional ). Direct labor costs (professional ) Support staff salaries Computer lease payments . Office supplies 140,000 46,000 $ 26,000 Office rent 63,000 Later that same year in November , Sierra Design served several clients Records for two clients appear here: DineNow.com Direct labor hours Licensing costs Travel costs Delightful Dining 710 hours 2,300 40 hours 300 $ 10,000 Requirements 1. Compute Sierra Design's predetermined indirect cost allocation rate for the current year Compute the total cost of each of the two jobs listed . 3. If Sierra Design wants to earn profits equal to 20 % of sales revenue , how much ( what total fee ) should the company charge each of these two clients ? 4. Why does Sierra Design assign costs to jobs ?
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