Concept explainers
Using job order costing in a service company
Learning Objective 6
2. Tasty Co-op $312,500
Skylark Design, Inc. is a Web site design and consulting firm. The firm uses a job order costing system in which each client is a different job. Skylark Design assigns direct labor, licensing costs, and travel costs directly to each job. It allocates indirect
At the beginning of 2018, managing partner Judi Jacquin prepared the following budget estimates:
Direct labor hours (professionals) | 8,000 hours |
Direct labor costs (professionals) | $2,000,000 |
Support staff salaries | 866,000 |
Computer leases | 49,000 |
Office supplies | 24,000 |
Office rent | 61,000 |
In November 2018, Skylark Design served several clients. Records for two clients appear here:
Tasty Co-op | Maynard Chocolates | |
Direct labor hours | 800 hours | 300 hours |
Software licensing costs | $1,500 | $500 |
Travel costs | 11,000 | 0 |
Requirements
- Compute Skylark Design's direct labor rate and its predetermined overhead allocation rate for 2018.
- Compute the total cost of each job.
- If Judi wants to earn profits equal to 50% of service revenue, what fee should she charge each of these two clients?
- Why does Skylark Design assign costs to jobs?
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