Reference no: EM132967513

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 labor, 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 labor hours.

At the beginning of the current year, managing partner, Sylvia Long prepared a budget:

Direct labor hours (Professional) 35,000 hours

Direct labor cost ( Professional) $3,500,000

Support staff salaries 610,000

Rent and utilities 190,000

Supplies 30,000

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 labor hours       820 hours                   64 hours

Software licensing costs   $2,980                    $560

Travel costs                    $18,000                   $0

Requirements:

Problem 1. Compute Kiji.ca's predetermined indirect cost allocation rate for the current year based on direct labor hours.

Problem 2. Compute the total cost on each job.

Problem 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?