Question

Littleton Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Littleton has four public relations specialists and office staff. At the beginning of 2019, Littleton estimated the total cost of salaries and benefits for the public relations specialists at $684,000 and a total of 7,600 billable hours for the year. The office and administrative costs were estimated at $418,000. The allocation base for office and administrative costs is billable hours. A new client is contracting with Littleton to promote a ballet tour in the United States. Littleton estimates that the job will require 40 billable hours of specialist time. If Littleton wishes to have a 20% mark up on cost on the job, what price should Littleton quote to the client? O A. $6,960.00 O B. $1,160.00 O C. $2,200.00 OD. $3,600.00

Answer 1

Estimated cost of salaries and benefits for public relations specialist =$684,000

Estimated billable hours = 7,600

Estimated billable hours = 7,600

Estimated office and administrative costs = $418,000

Total estimated cost = Estimated cost of salaries and benefits for public relations specialist + Estimated office and administrative costs

= 684,000+418,000

= $1,102,000

Allocation rate = Total estimated cost / Estimated billable hours

= 1,102,000/7,600

= $145

Billable hours required for client job = 40

Cost of Job = Allocation rate x Billable hours required for client job

= 145 x 40

= $5,800

Mark up = 20% on cost

= 5,800 x 20%

= 1,160

Price to be quoted = Cost of job + Mark up

= 5,800+1,160

= $6,960

Correct option is A.

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