What equation was used to get the answer in requirement 3?
Consulting to control costs.
Requirement 1. Compute Draper's
predetermined overhead (OH) allocation rate for
2018.
Estimated OH costs / Estimated direct labor costs = Predetermined OH allocation rate
$198,000 / $990,000 = 20 %
Requirement 2. Compute the total cost of each job.
First, enter the direct costs for each job. Then enter in the indirect costs and compute the total cost for each job. (Complete all answer boxes. Enter a "0" for any zero balances. Round all currency amounts to the nearest whole dollar.)
Draper Consulting
Estimated Cost of Sal's Trains and Kayla's Cookies Jobs
Sal's Kayla's
Trains Cookies
Direct Costs:
Direct labor
810 hrs. x $180 $145,800
450 hrs. x $180 $81,000
Meal per diem 2,100 450
Travel costs 9,000 0
Total Direct Costs 156,900 81,450
18
Allocated Indirect Costs:
20 % x $145,800 29,160
20 % x $81,000 16,200
Total Cost $186,060 $97,650
Requirement 3. If Draper wants to earn profits equal to 25% of sales revenue, what fee should it charge each of these two clients? (Round your answers to the nearest whole dollar.)
Sal's
Trains:
$ 248,080
Kayla's
Cookies: $ 130,200
How did you get the $180?
To determine the fee that Draper should charge each client, we can use the following equation:
Fee = Total Cost / (1 - Desired Profit Margin)
In this case, the desired profit margin is 25% of sales revenue. We can calculate the fee for each client using the equation above:
For Sal's Trains:
Fee = $186,060 / (1 - 0.25)
Fee = $186,060 / 0.75
Fee = $248,080
For Kayla's Cookies:
Fee = $97,650 / (1 - 0.25)
Fee = $97,650 / 0.75
Fee = $130,200
Therefore, Draper should charge $248,080 to Sal's Trains and $130,200 to Kayla's Cookies.
To get the answer in requirement 3, you need to calculate the fee Draper Consulting should charge each of the two clients. The fee should be equal to 25% of the total cost for each client.
In this case, the total cost for Sal's Trains is $186,060 and for Kayla's Cookies is $97,650.
To calculate the fee, you need to multiply the total cost by 25% (0.25).
For Sal's Trains:
Fee = $186,060 x 0.25 = $46,515
For Kayla's Cookies:
Fee = $97,650 x 0.25 = $24,413.75 (rounding to the nearest whole dollar, this becomes $24,414)
Therefore, the fee Draper should charge each of these two clients is $46,515 for Sal's Trains and $24,414 for Kayla's Cookies.