Q13SE_b. - Horngren'S Financial And Managerial Accounting

Question

Question: Using job order costing in a service company

Roth Accounting pays Jack Smith $90,000 per year.

Requirements

2. What direct labor cost would be assigned to Client 507 if Smith works 15 hours to prepare Client 507’s financial statements?

Step-by-Step Solution

Answer

Answer:

The direct labor cost assigned to client 507 is $900.                                                           

Step 1: Direct cost

Direct cost means the cost which is directly related to the production of the company’s goods. It may be direct material cost or direct labor cost.

Step 2: Direct labor cost

$$\begin{gathered} \mathrm{Direct} \mathrm{labor} \mathrm{cost}=\mathrm{Hourly} \mathrm{cost}\times \mathrm{Working} \mathrm{hours} \\ =\$60\times 15 \\ =\$900 \end{gathered}$$