Assignment
Assume you are going to start your own business:
Interior Design Business
Answer the following questions:
1. What would the major costs of your business be? Classify these into the areas of direct materials, direct labor, manufacturing overhead, general and administrative costs, and selling cost. You might not have something in every category.
2. Why would you need to determine the cost of providing your product or service to individual customers? What types of decisions do you expect to make based on this job order cost information?
3. In general, would you expect your company's indirect(overhead) costs to be less or more than the direct costs(direct material and direct labor)? What allocation base do you think you would charge overhead costs to individual customers? How much do you think the overhead rate would need to be?
4. Create a job cost sheet for a hypothetical "average" customer that includes estimates of the major costs or serving that customer. How much do you think you would need to charge to cover all of the cost plus provide a reasonable profit?