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	$	8,230,000
Fixed overhead cost	$	4,938,000
Variable overhead cost per direct labor-dollar	$	0.14

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 materials	$	1,422,000
Direct labor cost	$	2,469,000

• Required 1

Compute the predetermined overhead rate. (Round your answer to 2 decimal places.)

	Predetermined overhead rate per DL$

Compute the total job cost for this particular film.

• Required 2

Compute the total job cost for this particular film. (Round your intermediate calculations to 2 decimal places.)

	Direct materials Direct labor Overhead applied Total job cost

Answer 1

1. Calculation of Predetermined Overhead rate with direct labor dollars as basis: $8,230,000 Estimated Direct labor-dollars Variable overhead cost per direct labor-dollar S0.14 Variable Overhead Cost Fixed overhead cost = $8,230,000 x $0, 14-$1,152,200 $4,938,000 Total estimated overhead cost Fixed Overhead Cost + Variable Overhead Cost $4,938,000 $1,152,200 - $6,090,200 Total estimated overhead Cost $6,090,200 $8,230,000 Predetermined overhead rate = $0.74 per direct labor dollar Total direct labor cost Predetermined Overhead rate - S0.74 per DL Note -Predetermined Overhead Rate is calculated by using estimated amounts...

2. Total Job Cost Amount Direct Materials S1,422,000 Direct Labor Cost S2,469,000 $1,827,060 I$2,469,000x S0.74 S5,718,0610 $1,422,000+$2,469,000+ $1,827,060] Overhead applied [Direct labor Cost x Predetermined Overhead Rate] Total Job Cost Material Cost+ Labor Cost+ Overhead applied]