Question

Yancey Productions is a film studio that uses a job-order costing system. The company’s direct materials consist of items such as costumes and props. Its direct labor includes each film’s actors, directors, and extras. The company’s overhead costs include items such as utilities, depreciation of equipment, senior management salaries, and wages of maintenance workers. Yancey applies its overhead cost to films based on direct labor-dollars.At the beginning of the year, Yancey made the following estimates:Direct labor-dollars to support all productions $ 8,370,000Fixed overhead cost $ 5,022,000Variable overhead cost per direct labor-dollar $ 0.07Required:1. Compute the predetermined overhead rate.2. During the year, Yancey produced a film titled You Can Say That Again that incurred the following costs:Direct materials $ 1,420,000Direct labor cost $ 2,511,000Compute the total job cost for this particular film.

Answer 1

Answer:

1. predetermined overhead rate= 1.3

2. Total cost= $7,195,300

Explanation:

Giving the following information:

Direct labor-dollars to support all productions $ 8,370,000.

Fixed overhead costs $ 5,022,000.

Variable overhead cost per direct labor-dollar $ 0.07.

Yancey applies its overhead cost to films based on direct labor-dollars.

1. Compute the predetermined overhead rate.

predetermined overhead rate= Estimated total overhead cost/Estimated total amount of the allocation base

predetermined overhead rate= (0.7*8370000+5022000)/ 8370000

predetermined overhead rate= 10881000/8370000= 1.3

2. Compute the total job cost for this particular film.

Direct materials $ 1,420,000

Direct labor cost $ 2,511,000

Overhead= 2511000*1.3= 3,264,300

Total cost= $7,195,300