Fogelin Promotional Services Uses a Job Order System for Costing

question 4

Multiple Choice

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 2014,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.The office and administrative costs were estimated at $676,800.The allocation base for office and administrative costs is billable hours.In June,Fogelin signed a contract for a Russian ballet performance.It negotiated a price of $6,400 for their services.When the job was complete,Fogelin's records showed that it 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

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Definitions:

Allowance Method

An accounting technique that estimates and sets aside a portion of accounts receivable deemed uncollectible as an allowance for doubtful accounts.

Account Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Total Current Assets

The sum of all assets expected to be converted into cash, sold, or consumed within one year or the normal operating cycle, whichever is longer.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of a company's accounts receivable that may not be collectible.