Question

Midtown Advertising Agency in Cincinnati, Ohio. This small ad agency has two managing partners who pay themselves annual salaries of $100,000 each, and an artistic staff of six people who each earn $50,000 per year. Fringe benefits for these professionals average 42 percent of their compensation. So Midtown Advertising Agency's direct professional labor budget is as follows Partner salaries Partner benefits (42%) $200,000 84,000 Total partner $284,000 compensation Artistic staff salaries Artistic staff benefits $300,000 126,000 (42%) Total artistic staff compensation $426,000 Midtown's accountant has estimated that one-third of the budgeted overhead cost is incurred to support the ad agency's two partners, and two-thirds of it goes to support the artistic staff. During May, Midtown Advertising Agency completed an advertising project for Super Scoop Ice Cream Company. The contract required $1,800 in direct material, $1,200 of partner direct professional labor, and $2,000 of artistic staff direct professional labor Overhead is assigned to each ad contract at the rate of 89 percent of partner direct professional labor plus 118 percent of artistic staff direct labor. The total cost of the contract is computed as follows

Answer 1