Acc206 Principles of Accounting: P17-37 Draper Consulting uses a job order costing system

Acc206 Principles of Accounting

P17-37 Accounting for Manufacturing Overhead [25-35 min]
This problem continues the Draper Consulting, Inc., situation from Problem 16-35 of Chapter 16.

Draper Consulting uses a job order costing system in which each client is a different job. Draper traces direct labor, daily per diem, 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 2013, the controller prepared the following budgets:
Direct labor hours (professional) 5,500 hours
Direct labor costs (professional) $990,000
Support staff salaries 105,000
Computer leases 48,000
Office supplies 15,000
Office rent 30,000

In November 2013, Draper served several clients. Records for two clients appear here:
Tommy's Trains Marcia's Cookies
Direct labor hours 730 300 hours
Meal - per diem $2,600 $600
Travel costs $11,000 $-

1. Compute Draper's predetermined indirect cost allocation rate for 2013.
2. Compute the total cost of each job.
3. If Draper wants to earn profits equal to 25% of sales revenue, how much (what fee) should it charge each of these two clients?
4. Why does Draper assign costs to jobs?
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