Question

Che 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. oints At the beginning of the year, Yancey made the following estimates: too Direct labor dollars to support all productions Fixed overhead cost Variable overhead cost per direct labor dollar $ $ 8,390,000 5.034.000 0.19 Required: 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 saterials Direct labor cost 5 $ 1.46.00 2.517.000 Compute the total job cost for this particular film

Answer 1

1..
Answer:
The Overheads absorption rate is determined by summing up fixed overheads rate per labour $ and variable overheads rate per labour $.
The Variable overheads rate is given as $ 0.19 per labour $.
However, to compute the fixed overheads rate per labour $, the total fixed overheads estimated in the begining of the year is divided by total estimated labour cost in the beginning of the year.
Computation of predetermined Overhead rate :
Variable overhead rate per labour $		0.19
Fixed Overheads rate par labour $:
Total fixed overheads	$5,034,000
Divide: Total labour cost	$8,390,000
Fixed Overheads rate par labour $		0.6
Total Ovetheads rate per labour $		0.79
2..
Answer:
Now the job cost is computed by adding the material cost, labour cost used in the job and overheads.
Computation of total job cost :
Total job cost:
Direct material	$1,446,000
Direct labour	$2,517,000
Overhead applied	$1,988,430
Total job cost	$5,951,430
Working note:
Overhead applied in jobs:
Labour cost incurred in job	$2,517,000
Overhead rate per labour $	0.79
Overhead applied in job	$1,988,430