Island Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances.Island has four public relations specialists and office staff.At the beginning of the year,Island estimated the total cost of salaries and benefits for the public relations specialists at $684,000 and a total of 7200 billable hours for the year.The office and administrative costs were estimated at $432,000.The allocation base for office and administrative costs is billable hours.In June,Island signed a contract for a Russian ballet performance.It negotiated a price of $6400 for its services.When the job was complete,Island's records showed that it had logged 36.0 billable hours.What was the actual total cost of the job for Island?

Question

Quizplus · Accepted Answer

The actual total cost of the job is the sum of the direct costs and the indirect costs. The direct costs are the costs that can be directly traced to the job, such as the salaries of the public relations specialists who worked on the job. The indirect costs are the costs that cannot be directly traced to the job, such as the office and administrative costs.The direct costs for the job are $6400, which is the price that Island negotiated for its services. The indirect costs for the job are $1260, which is the amount of office and administrative costs that are allocated to the job. The total cost of the job is therefore $5580, which is the sum of the direct costs and the indirect costs.

Island Promotional Services Uses a Job Order System for Costing