Question

An advertising agency is estimating costs for promoting a music festival. The job will require 200 direct labor hours at a cost of $50 per hour. Overhead costs are applied at a rate of $65 per direct labor hour.

1. What is the total estimated cost for this job?
2. If the company applies a markup of 20% of total costs (price quote is 120% of total costs), what price should it quote for this job?

Answer 1

Answer:

$23,000 and $27,600

Step-by-step explanation:

To find the total cost of the job, we do the equation: $50 x 200

This equation will calculate the cost of the direct labor.

$50 x 200 = $10,000

Now, calculate the overhead prices

The equation is 200 x $65

This equals 13,000

Now add them and you get 23,000

The cost of the job is $23,000

To find the markup, 1.2 x $23,000 = $27,600