(L. OBJ. 5) Job order costing in a service company [20—25 min] Crow Design, Inc., is a...

(L. OBJ. 5) Job order costing in a service company [20—25 min]

Crow 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. Crow 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 Sheila Biggs prepared the following budget:

In October 2011, Crow Design served several clients. Records For two clients appear here:

Requirements

1. Compute Crow Design’s predetermined indirect Cost allocation rate for 2011.

2. Compute the total cost of each job.

3. If Biggs wants to earn profits equal to 20% of sales revenue, how much (what fee) should she charge each of these two clients?

4. Why does Crow Design assign costs to jobs?