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 $ 8,260,000Fixed overhead cost $ 4,956,000Variable overhead cost per direct labor-dollar $ 0.17Required:1. Compute the predetermined overhead rate. (I found the answer: .77 per DL$)2. During the year, Yancey produced a film titled You Can Say That Again that incurred the following costs:Direct materials $ 1,386,000Direct labor cost $ 2,478,000Compute the total job cost for this particular film.Direct Materials: $1,386,000Direct Labor: $2,478,000

Answer 1

Answer and Explanation:

The computation is shown below:

Predetermined overhead rate is

= Variable overhead cost per direct labor hours + Fixed overhead cost ÷ Direct labor-dollars

= $0.17 + $4,956,000 ÷ 8,260,000

= $0.17 + $0.6

= $0.77

Now the total cost is

= Direct material cost + direct labor cost + manufacturing cost

= $1,386,000 + $2,478,000 + ($2,478,000 × $0.77)

= $5,772,060