KLP provides consulting services and uses a job-order system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by KLP, but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, overhead, and a markup. KLP anticipates the following costs for the upcoming year: KLP's partners desire to make a $480,000 profit for the firm and plan to add a percentage markup on total cost to achieve that figure. On May 14, KLP completed work on a project for Lawson Manufacturing. The following costs were incurred: professional staff salaries, $68,000; administrative support staff, $8,900; travel, $10,500; and other operating costs, $2,600. REQUIRED: (a) Determine KLP's total traceable costs for the upcoming year and the firm's total anticipated overhead. (b) Calculate the predetermined overhead rate. The rate is based on total costs traceable to client jobs. (c) What percentage of total cost will KLP add to each job to achieve its profit target? (d) Determine the total cost of the Lawson Manufacturing project. How much would Lawson be billed for services performed?
KLP provides consulting services and uses a job-order system to accumulate the cost of client projects. Traceable costs are charged directly to individual clients; in contrast, other costs incurred by KLP, but not identifiable with specific clients, are charged to jobs by using a predetermined overhead application rate. Clients are billed for directly chargeable costs, overhead, and a markup.
KLP anticipates the following costs for the upcoming year:
KLP's partners desire to make a $480,000 profit for the firm and plan to add a percentage markup on total cost to achieve that figure.
On May 14, KLP completed work on a project for Lawson Manufacturing. The following costs were incurred: professional staff salaries, $68,000; administrative support staff, $8,900; travel, $10,500; and other operating costs, $2,600.
REQUIRED:
(a) Determine KLP's total traceable costs for the upcoming year and the firm's total
anticipated overhead.
(b) Calculate the predetermined overhead rate. The rate is based on total costs
traceable to client jobs.
(c) What percentage of total cost will KLP add to each job to achieve its profit target?
(d) Determine the total cost of the Lawson Manufacturing project. How much would
Lawson be billed for services performed?
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