Kiji.ca is an internet advertising agency. The firm uses a job cost system in which each client is a
different "job." Kiji.ca traces direct labour, software licensing costs, and travel costs directly to each client (job). The company allocates the indirect costs to jobs based on a predetermined indirect cost allocation rate based on direct labour hours.
At the beginning of the current year, managing partner, Sylvia Long prepared a budget:
| Direct labour hours (Professional) | 35,000 hours |
| Direct labour cost ( Professional) | $3,500,000 |
| Support staff salaries | 610,000 |
| Rent and utilities | 190,000 |
| Lease payments on computer hardware | 570,000 |
During February of the current year, Kiji.ca served several clients. Records for two clients appear here:
| GoneAway.com | VacationHomes.com |
| Direct labour hours | 820 hours | 64 hours |
| Software licensing costs | $2,980 | $560 |
Requirements:
| 1. | Compute Kiji.ca's predetermined indirect cost allocation rate for the current year based on |
direct labour hours.
| 2. | Compute the total cost on each job. |
| 3. | If Kiji.ca wants to earn profits equal to 20% of total cost, then how much (what total fee) should |
it charge each of these clients?
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