Question

Groot Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances. Groot has four public relations specialists plus an office staff. At the beginning of the​ year, Groot estimated the total cost of salaries and benefits for the public relations specialists at $ 672 comma 000 and a total of 7 comma 000 billable hours for the year. All remaining office and administrative costs were estimated at $ 406 comma 000. The allocation base for office and administrative costs is billable hours. In​ June, Groot signed a contract for a Russian ballet performance. It estimated the new contract would require 35 hours of specialist time. What is the total cost estimate for this​ contract?

Answer 1

Answer:

$5,390

Explanation:

For computing the total cost estimated first we need to find out the total cost per billable hour which is shown below:

Total cost per billable hour is

= (Salary & Benefits + Office & Admin costs) ÷ (Billable hours)

= ($672,000 + $406,000) ÷ (7,000 billabe hours)

= $154

Now the total estimated cost is

= Requied hours × total cost per billabe hours

= 35 hours × $154

= $5,390

We simply applied the above formulas