4) Job order costing is well suited for the service industry.
5) When job order costing is used in the service industry, the allocation of indirect costs is normally based on machine hours.
6) For a service company, such as an accounting firm, each client is considered a job.
7) Unlike manufacturing companies, service companies use an allocation base for allocating both direct and indirect costs.
8) Process costing is more appropriate for service companies than job order costing.
9) The engineering firm of Dobbs and Smith uses a job order costing system to accumulate client-related costs. The overhead rate is 60% of direct labor cost. Staff engineer's time is charged at a rate of $80 per hour. A recent job for a client involved 30 staff labor hours. How much was the total job cost?
10) Dexter Accounting expects its accountants to work a total of 24,000 direct labor hours per year. Dexter's estimated total indirect costs are $240,000. Direct labor hours is the allocation base for indirect costs. What is the indirect cost allocation rate?
A) $10 per hour
B) $20 per hour
C) $100 per hour
D) $120 per hour
11) Dexter Accounting expects its accountants to work for 24,000 direct labor hours per year. Dexter's estimated total indirect costs are $240,000. The direct labor rate is $75 per hour. Direct labor hours is the allocation base for indirect costs. If Dexter does a job requiring 40 hours of direct labor, what is the total job cost?
12) Aminta Accounting expects its accountants to work a total of 30,000 direct labor hours per year. Aminta's estimated total indirect costs are $150,000. The direct labor rate is $100 per hour. Direct labor hours is the allocation base for indirect costs. If Aminta does a job requiring 50 hours of direct labor and bills the client using a standard markup of 40%, calculate the amount of the client's bill.
13) Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business. Bilkins has 4 professionals on staff, plus an office with 6 clerical staff. Total compensation, including benefits, for the professional staff runs about $576,000 per year, and normal billable hours are 8,000 hours per year. Professional staff keeps detailed timesheets organized by the client number. Office and administrative costs total $754,000 a year. What is the cost allocation rate that Bilkins will use for direct labor i.e. the cost of the professional staff?
A) $75 per hour
B) $36 per hour
C) $72 per hour
D) $76 per hour