Job-Order Costing System and Consulting Services

Traceable Costs and Overhead for JLR Enterprises

Task:

JLR Enterprises provides consulting services throughout California and uses a job-order costing system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by JLR, but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, over-head, and a markup.

Required:

1.Determine JLR’s total traceable costs for the upcoming year and the firm’s total anticipated overhead.

2. Calculate the predetermined overhead rate. The rate is based on total costs traceable to client jobs.

3. What percentage of cost will JLR add to each job to achieve its profit target?
4. Determine the total cost of the Martin Manufacturing project. How much would Martin be billed for services performed?

5. Notice that only 50 percent of JLR’s other operating cost is directly traceable to specific client projects. Cite several costs that would be included in this category and difficult to trace to clients.

6. Notice that 80 percent of the professional staff cost is directly traceable to specific client projects. Cite several reasons that would explain why this figure isn’t 100 percent.