Lake Country Promotional Services Uses a Job Order System for Costing

question 47

Multiple Choice

Lake Country Promotional Services uses a job order system for costing and billing promotional services for dance and ballet performances.Lake Country has four public relations specialists plus an office staff.At the beginning of the year,Lake Country estimated the total cost of salaries and benefits for the public relations specialists at $656,000 and a total of 8,000 billable hours for the year.The office and administrative costs were estimated at $392,000.The allocation base for office and administrative costs is billable hours.In June,Lake Country signed a contract for a Russian ballet performance.It negotiated a price of $6,700 for its services.When the job was complete,Lake Country's records showed that it had logged 37.5 billable hours.What was the amount of gross profit that Lake Country made on the job?

• A) $6,700
• B) $3,075
• C) $1,787
• D) $1,838

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Definitions:

Substitution Effects

The change in consumption patterns due to a change in the relative prices of goods.

Normal Goods

Goods for which demand goes up when income is higher and for which demand goes down when income is lower.

Wage Rate

The standard amount of pay given to an employee for services rendered, typically expressed on a per hour basis.

Labor Supplied

Labor supplied refers to the total hours that workers are willing and able to work at a given wage rate.