Question 1 Fogelin Promotional Services uses a job order system for costing and

Question

Question 1

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 2012, Fogelin estimated the total cost of salaries and benefits for the public relations specialists at $403,200, and a total of 7,200 billable hours for the year. All remaining office and administrative costs were estimated at $676,800.

In June, Fogelin signed a contract for a Russian ballet performance. They negotiated a price of $6,400 for their services. When the job was complete, Fogelin's records showed that they had logged 36.5 billable hours. What was the amount of gross profit that Fogelin made on the job?

A) 1,494

B) 2,969

C) 925

D) 4,356

Explanation / Answer

The amount of gross profit that Fogelin made on the job = $925

Compensation Expense rate per hour

= [Total compensation Expenses / Total number of hours billed by specialists ]

= $403,200 / 7,200 Hours

= $56 per hour

Office and administrative costs per hour

= [ Total Office and administrative costs / Total number of hours billed by specialists ]

= $676,800 / / 7,200 Hours

= $94 per hour

Gross profit = Revenues – Direct Costs – Indirect Costs

= $6,400 – [ 36.50 Hours x $56 ] - [ 36.50 Hours x $94 ]

= $6,400 – 2,044 – 3,431

= $925

Hence, The Answer is “ C. $925 ”

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.