Question

Which of the following is true when using job costing at a service​ firm?

A.
Professional labor cost would be considered an indirect cost of serving the client.
B.
Office rent would be considered a direct cost of serving the client.
C.
Both direct and indirect costs are assigned to client jobs.
D.
The professional billing rate consists solely of the​ professionals' labor cost.

Answer 1

Both direct and indirect costs are assigned to client jobs when using job costing at a service firm, with professional labor being a direct cost and office rent an indirect cost.

Step-by-step explanation:

Which of the following is true when using job costing at a service firm? The accurate answer is C. Both direct and indirect costs are assigned to client jobs. Professional labor cost, such as a lawyer's or an accountant's time spent on a client, is usually considered a direct cost because it is directly allocable to a specific client's job.

On the other hand, office rent is generally an indirect cost since it supports all the activities of the firm and cannot be attributed to a single client's job. The professional billing rate includes not just the labor cost but also a portion of indirect costs such as rent, utilities, and administrative staff salaries to cover the total cost of providing the service.

Implicit costs like opportunity costs are also essential when considering overall profitability, but they are not included in the job costing for a client.