Plumley Ad Agency contracted with a company to prepare an ad campaign. Plumley uses a job order costing system. Plumley estimates that the job will take 145 designer hours at $90 per hour and 85 staff hours at $45 per hour. Plumley uses two overhead rates in applying overhead to jobs: Designer-related at $100 per designer hour and staff-related at $50 per staff hour. Determine the total estimated cost for this job.
(Hint: What is total direct labor for each job type and total overhead for each job total? Sum of all of these costs is the total estimated cost for this job).
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To determine the total estimated cost for this job, we need to calculate the total direct labor cost for each job type and the total overhead cost for the job.
1. Total Direct Labor Cost for Designer Hours:
- Designer hours: 145 hours
- Rate per designer hour: $90
- Total direct labor cost for designer hours: 145 hours x $90/hour = $13,050
2. Total Direct Labor Cost for Staff Hours:
- Staff hours: 85 hours
- Rate per staff hour: $45
- Total direct labor cost for staff hours: 85 hours x $45/hour = $3,825
3. Total Overhead Cost for Designer-related Overhead:
- Designer hours: 145 hours
- Overhead rate per designer hour: $100
- Total overhead cost for designer-related overhead: 145 hours x $100/hour = $14,500
4. Total Overhead Cost for Staff-related Overhead:
- Staff hours: 85 hours
- Overhead rate per staff hour: $50
- Total overhead cost for staff-related overhead: 85 hours x $50/hour = $4,250
5. Total Estimated Cost for this Job:
- Total direct labor cost: $13,050 + $3,825 = $16,875
- Total overhead cost: $14,500 + $4,250 = $18,750
- Total estimated cost for this job: $16,875 + $18,750 = $35,625
Therefore, the total estimated cost for this job is $35,625.