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 $680,000 and a total of 8000 billable hours for the year.The office and administrative costs were estimated at $408,000.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 38 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?

Question

Quizplus · Accepted Answer

First, we need to calculate the hourly rate for the public relations specialists, which is calculated as follows:

Hourly rate = Total cost of salaries and benefits / Total billable hours 
Hourly rate = $680,000 / 8,000 = $85 per hour

Next, we need to calculate the total cost of the job:

Total cost = Specialist time x Hourly rate 
Total cost = 38 hours x $85 per hour = $3,230

Finally, we need to add the markup to the total cost:

Price to quote = Total cost x (1 + Markup percentage) 
Price to quote = $3,230 x (1 + 0.20) = $3,876

Therefore, the best choice is C, $6,202.

Littleton Promotional Services Uses a Job Order System for Costing