Problem:
(Cost accumulation; assigning costs to jobs) Gigi LeBlanc is an advertising consultant who tracks costs for her jobs using a job order costing system. During September, LeBlanc and her staff worked on and completed jobs for the following companies:
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Reliant
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Dumas
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Company
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Manufacturing
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Omaha Inc.
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Direct material cost
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$7,800
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$14,200
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$19,800
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Direct labor cost
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$5,580
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$18,000
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$28,350
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Number of promotions designed
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3
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10
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8
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Direct material can be traced to each job because these costs are typically associated with specific advertising campaigns. Based on historical data, LeBlanc has calculated an overhead charge of $58 per direct labor hour. The normal labor cost per hour is $45.
a. Determine the total cost for each of the advertising accounts for the month.
b. Determine the cost per promotion developed for each client. (Round to the nearest dollar.)
c. LeBlanc charges $8,600 per promotion. What was her net income for the month, assuming actual overhead for the month was $50,000? Adjust for under- or overapplied overhead.
d. You suggest to LeBlanc that she bill ads on a cost-plus basis and suggest a markup of30 percent on cost. How would her income have compared to her income computed in (c) if she had used this method? How would her clients feel about such a method?