Question

Integrity Accounting Firm provides various financial services to organizations. Integrity has decided to price its jobs at the total variable costs of the job plus 14.3 percent. The job for a medium-sized dance club client included the following costs:

Direct materials $20,000
Direct labor (partners and staff accountants) 150,000
Depreciation (using straight-line method) on
Integrity’s office building 50,000

Required:
Calculate the price charged by The J. Escobar Law Firm to the dance club.

Answer 1

To calculate the price charged by The J. Escobar Law Firm to the dance club, add the total variable costs of the job and the desired profit margin.

Step-by-step explanation:

To calculate the price charged by The J. Escobar Law Firm to the dance club, we need to add the total variable costs of the job (direct materials and direct labor) and the desired profit margin of 14.3 percent.

The total variable costs are $20,000 (direct materials) + $150,000 (direct labor) = $170,000.

The price charged to the dance club would be $170,000 + (14.3% × $170,000) = $194,810.

Answer 2

$194,310

Step-by-step explanation:

The price charged by The J. Escobar Law Firm to the dance club is as follows:

Direct Materials $20,000

Direct Labour $150,000

Total Variable Cost of Jobs $170,000

14.3% Mark up on TVC $24,310

The price charged ro the club $194,310