Littleton Promotional Services Uses a Job Order System for Costing

question 37

Multiple Choice

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 40 billable hours of specialist time.If Littleton wishes to have a 25% mark up on cost on the job,what price should Littleton quote to the client?

• A)$3400
• B)$2040
• C)$6800
• D)$1360

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Definitions:

Equivalent Annual Annuity

A financial calculus method for comparing the annualized cash flows of projects with different lifespans.

Initial Outlays

The initial investments or costs incurred when starting a project, business, or investment.

Net Present Value

A financial measure that assesses an investment's profitability by calculating the difference between the present value of cash inflows and the present value of cash outflows throughout a certain timeframe.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.