Fogelin Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances.Fogelin has four public relations specialists,plus an office staff.At the beginning of 2014,Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $676,800,and a total of 7,200 billable hours for the year.All remaining office and administrative costs were estimated at $403,200.The allocation base for office and administrative costs is billable hours.In June,Fogelin signed a contract for a Russian ballet performance.It estimated it would require 34 hours of specialist time.What is the total cost estimate for this contract?

Question

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate using the total estimated office and administrative costs and the estimated billable hours:
Predetermined overhead rate = Total estimated office and administrative costs ÷ Estimated billable hours
Predetermined overhead rate = $403,200 ÷ 7,200 = $56 per billable hour

Next, we can calculate the cost of the specialist time required for the Russian ballet performance:
Cost of specialist time = Specialist rate per hour × Hours of specialist time
Cost of specialist time = $676,800 ÷ 7,200 ÷ 4 × 34 = $6,375

Finally, we can calculate the total cost estimate for the contract by adding the cost of specialist time to the allocated office and administrative costs:
Total cost estimate = Cost of specialist time + Allocated office and administrative costs
Total cost estimate = $6,375 + ($56 per hour × 34 hours) = $6,375 + $1,904 = $8,279

Therefore, the answer is choice B) $5,100, as it is not one of the options and the actual total cost estimate is $8,279.

Fogelin Promotional Services Uses a Job Order System for Costing