Fogelin Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Fogelin has 4 public relations specialists, plus an office staff. At the beginning of 2013, Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $403 200, and a total of 7 200 available hours for the year. All remaining office and administrative costs were estimated at $676 800. A new client is contracting with Fogelin to promote a ballet tour in the U.S. Fogelin estimates that the job will require 40 available hours of specialist time. If Fogelin wishes to make a 25% gross profit on the job, what price should Fogelin quote to the client?

Question

Quizplus · Accepted Answer

The cost per hour for the specialists is $403,200 / 7,200 hours = $56 per hour. For 40 hours, the cost is 40 * $56 = $2,240. The total cost including office and administrative costs is $2,240 + ($676,800 / 7,200 * 40) = $2,240 + $3,760 = $6,000. To achieve a 25% gross profit, the price should be $6,000 / (1 - 0.25) = $8,000. However, since $7,500 is the closest option, it seems there might be a slight error in the calculation or options provided.

Fogelin Promotional Services Uses a Job Order System for Costing