Reference no: EM132649567
ABC Consulting Services provides consulting services throughout Australia and New Zealand. It uses a job costing system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by ABC but not identifiable with specific clients are charged to jobs by using a predetermined overhead rate. Clients are billed for directly chargeable costs, overhead and a mark-up for the profit margin.
ABC's financial controller, Janet Campbell, anticipates the following costs for the coming year:
Percentage of cost directly traceable to clients $
Professional staff salaries 2 500 000 80%
Administrative support staff 500 000 50%
Travel 250 000 95% Photocopying 50 000 95%
Other operating costs 100 000 50% Total 3 300 000
The firm's management wishes to make a $850 000 profit for the firm and plans to add a percentage mark-up on total cost to achieve that figure.
On 10 April, ABC completed work on a project for ART Manufacturing. The following costs were incurred:
Cost
Professional staff salaries 10 000
Administrative support staff 8 000
Travel 5,000 Photocopying 500
Other operating costs 1500
Question (i) Determine ABC's total traceable costs for the coming year and the firm's total anticipated overhead.
Question (ii) Calculate the predetermined overhead rate, assuming the cost driver is traceable cost (Show the answer as a percentage).
Question (iii) What percentage of cost will ABC add to each job to achieve its profit target?
Question (iv) Determine the total cost of the ART Manufacturing project
Question (v)How much would ART be billed for the services performed? Explain your answer.
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