accounting  

 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.  Widget Design traces direct labor, licensing costs,
and travel costs directly to each job.  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 2011, managing partner Judi Johnson prepared the following budget:
Direct Labor Hours 10,000 hours
Direct Labor Costs  $ 1,400,000
Support Staff Salaries  $    170,000
Computer Leases  $      49,000
Office Supplies  $      29,000
Office Rent  $      60,000
In November 2011, Widget Design served several clients.  Records for two clients appear here:
Dining Coop Root Chocolates
Direct labor hours 740 hours 65 hours
Software licensing costs  $   2,100  $       300
Travel costs  $   9,000  $          –
Deliverables
1. Compute Design’s predetermined indirect cost allocation rate for 2011.
2. Compute the total cost of each job.
3. If Design’s inc wants to earn profits equal to 20% of sales revenue, how much (what fee) should
it charge each of these two clients?
4. Why does Widget Design assign costs to jobs?
Deliverable 1
The predetermined indirect cost allocation rate =
 
HINT: Do this with a formula showing indirect costs to total direct labor costs
Deliverable 2
First enter in the direct costs for each job.  Then enter in the indirect costs and total
costs for the jobs.
Make sure to enter “0” in the appropriate column.  Enter percentage amounts as a whole
number.  Round your answers to the nearest whole dollar.
 
  Widget Design, Inc.
  Estimated Cost of Dining Coop and Root Chocolates Jobs
  Dining Coop Root Chocolates
  Direct Costs:
  Direct labor
     
     
  Software licensing costs
  Travel
  Total Direct Costs
 
  Indirect Costs:
       $          –
       $           –
  Total Cost  $          –  $           –
 
 
Deliverable 3
  Determine the amount Robin Design, Inc. should charge these clients.
    (Round your answers to the nearest whole dollar.)
     
  Dining Coop:
 
  Root Chocolates:
 
Deliverable 4
Widget Designs, Inc. assigns costs to jobs to help the company
           
Assigning costs to:

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