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Question: kevin amp janet is an advertising agency the firm uses...

Question details

Kevin & Janet is an advertising agency. The firm uses a job cost system in which each client is a different​ "job." Kevin & Janet traces direct​ labor, software licensing​ costs, and travel costs directly to each job​ (client). The company allocates indirect costs to jobs based on a predetermined indirect cost allocation rate based on direct labor hours.

At the beginning of the current​ year, managing partner Jerry Annido prepared a​ budget:

                Data Table

Direct labor hours (professional). . . . .

17,500 hours

Direct labor costs (professional). . . . .

$1,750,000

Support staff salaries. . . . . . . . . . . .

$200,000

Rent and utilities. . . . . . . . . . . . . . .

$49,000

Supplies. . . . . . . . . . . . . . . . . . . . . .

$381,000

Lease payments on computer hardware. .

$70,000

      

During January of the current​ year, Kevin & Janet served several clients. Records for two clients appear​ here:     

Value Vacation.com

Port Change golf resort

Direct labor hours

720 hours

35 hours

Software licensing costs

$2800

$250

Travel costs

$13000

$0

Requirements

1.

Compute Kevin & JanetKevin & Janet​'s

predetermined indirect cost allocation rate for the current year based on direct labor hours.

2.

Compute the total cost of each job.

3.

If Kevin & JanetKevin & Janet

wants to earn profits equal to​ 20% of sales​revenue, how much​ (what total​ fee) should it charge each of these two​ clients?

4.

Why does Kevin & JanetKevin & Janet

assign costs to​ jobs?

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