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Marsha Design is an interior design and consulting firm. The firm uses a job order cost system in which each client represents an individual job. Marsha Design traces direct labor and travel costs to each job (client). It assigns indirect costs to clients at a predetermined overhead rate based on direct labor hours. At the beginning of the year, the managing partner, Marsha Cain, prepared the following budget: Direct labor hours (professional) Direct labor costs (professional) Indirect costs: Support staff salaries Office rent office supplies Total expected indirect costs 5,600 hours Direct labor cost (professional) Travel costs Direct labor hours. $560,000 $ 47,400 61,000 26,000 $134,400 Later that same year, in March, Marsha Design served several clients. Records for two clients appear below: Oliverio $4,600 500 46 hours McComb $3,600 100 36 hours Required: 1. Compute Marsha Design's predetermined overhead rate for the current year. 2. Compute the total cost of serving the clients listed. 3. Assume that Marsha charges clients $260 per hour for interior design services. How much gross profit would she earn on each of the clients above, ignoring any difference between actual and applied overhead?

Marsha Design is an interior design and consulting firm. The firm uses a job order cost system in which each client represents an individual job. Marsha Design traces direct labor and travel costs to each job (client). It assigns indirect costs to clients at a predetermined overhead rate based on direct labor hours. At the beginning of the year, the managing partner, Marsha Cain, prepared the following budget: Direct labor hours (professional) Direct labor costs (professional) Indirect costs: Support staff salaries Office rent office supplies Total expected indirect costs 5,600 hours Direct labor cost (professional) Travel costs Direct labor hours. $560,000 $ 47,400 61,000 26,000 $134,400 Later that same year, in March, Marsha Design served several clients. Records for two clients appear below: Oliverio $4,600 500 46 hours McComb $3,600 100 36 hours Required: 1. Compute Marsha Design's predetermined overhead rate for the current year. 2. Compute the total cost of serving the clients listed. 3. Assume that Marsha charges clients $260 per hour for interior design services. How much gross profit would she earn on each of the clients above, ignoring any difference between actual and applied overhead?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Marsha Design is an interior design and consulting firm. The firm uses a job order cost system in which each client represents an individual job. Marsha Design traces direct labor and travel costs to each job (client). It assigns indirect costs to clients at a predetermined overhead rate based on direct labor hours. At the beginning of the year, the managing partner, Marsha Cain, prepared the following budget: Direct labor hours (professional) Direct labor costs (professional) Indirect costs: Support staff salaries Office rent office supplies Total expected indirect costs 5,600 hours Direct labor cost (professional) Travel costs Direct labor hours. $560,000 $ 47,400 61,000 26,000 $134,400 Later that same year, in March, Marsha Design served several clients. Records for two clients appear below: Oliverio $4,600 500 46 hours McComb $3,600 100 36 hours Required: 1. Compute Marsha Design's predetermined overhead rate for the current year. 2. Compute the total cost of serving the clients listed. 3. Assume that Marsha charges clients $260 per hour for interior design services. How much gross profit would she earn on each of the clients above, ignoring any difference between actual and applied overhead?
Transcribed Image Text:Marsha Design is an interior design and consulting firm. The firm uses a job order cost system in which each client represents an individual job. Marsha Design traces direct labor and travel costs to each job (client). It assigns indirect costs to clients at a predetermined overhead rate based on direct labor hours. At the beginning of the year, the managing partner, Marsha Cain, prepared the following budget: Direct labor hours (professional) Direct labor costs (professional) Indirect costs: Support staff salaries Office rent office supplies Total expected indirect costs 5,600 hours Direct labor cost (professional) Travel costs Direct labor hours. $560,000 $ 47,400 61,000 26,000 $134,400 Later that same year, in March, Marsha Design served several clients. Records for two clients appear below: Oliverio $4,600 500 46 hours McComb $3,600 100 36 hours Required: 1. Compute Marsha Design's predetermined overhead rate for the current year. 2. Compute the total cost of serving the clients listed. 3. Assume that Marsha charges clients $260 per hour for interior design services. How much gross profit would she earn on each of the clients above, ignoring any difference between actual and applied overhead?
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