Question

Hummingbird Design, Inc. is a Web site design and consulting firm. The firm uses a job order costing At the beginning of 2018, managing partner Charlotte Adessa prepared the following budget estimates: system in which each client is a different job. Hummingbird Design assigns direct labor, licensing costs, and (Click the icon to view the prepared budget.) travel costs directly to each job. It allocates indirect costs to jobs based on a predetermined overhead In November 2018, Hummingbird Design served several clients. Records for two clients appear here: allocation rate, computed as a percentage of direct labor costs. (Click the icon to view the records for two clients.) Read the requirements Requirement 1. Compute Hummingbird Design's direct labor rate and its predetermined overhead allocation rate for 2018. (Abbreviation used: OH = overhead.) Begin with the direct labor rate. Direct labor rate per hour Compute Hummingbird Design's predetermined overhead cost allocation rate for 2018. Predetermined OH cost allocation rate Requirement 2. Compute the total cost of each job. First, enter the direct costs for each job. Then enter in the indirect costs and compute the total for each job. (Enter a "0" for any zero balances.) Hummingbird Design, Inc. Estimated Cost of Yummy Treats and Martin Chocolates Jobs Martin Choose from any list or enter any number in the input fields and then continue to the next question.

Answer 1

Requirement 1:

Direct Labor rate

Estimated direct labor costs / Estimated direct labor hours = Direct labor rate

$2,400,000 / 8,000 direct labor hours = $300 per hour

Predetermined overhead cost allocation rate

Estimated OH Costs / Estimated direct labor costs = Predetermined OH cost allocation rate

Estimated OH Costs = $338,000 + $50,000 + $24,000 + $68,000 = $480,000

$480,000 / $2,400,000 * 100 = 20%

Requirement 2:

Hummingbird Design, Inc.

Estimated Cost of Yummy treats and Martin chocolates Jobs

Particulars	Yummy Treats	Martin Chocolates
Direct Costs:
Labor cost
900 hours x $300 per hour	$270,000
200 hours x $300 per hour		$60,000
Software licensing costs	$2,500	$100
Travel costs	$9,000	$0
Total Direct Costs	$281,500	$60,100
Allocated Indirect costs:
20% x $270,000	$54,000
20% x $60,000		$12,000
Total Costs	$335,500	$72,100

Requirement 3:

Fees Charge

Let Sales Revenue be x,

x - (20% * x) = Total cost

0.8x = Total cost

Yummy Treats = $335,500 / 0.8 = $419,375

Martin Chocolates = $72,100 / 0.8 = $90,125

Requirement 4:

Hummingbird Design assigns costs to jobs to help the company to set sales prices that cover all costs and contribute to profit. Assigning costs to individual jobs also can help Hummingbird Design control costs.

All the best...