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 Fixed overhead cost Variable overhead cost per direct labor-dollar $7,300,000 $4,389, een $ 0.06 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 Direct labor cost $1,412,600 $2,190,000 Compute the total job cost for this particular film

Answer 1

Ans. Predetermined overhead rate = Total overhead cost / Estimated direct labor dollars

= $4,818,000 / $7,300,000

= $0.66 per direct labor dollar

*Working notes:

*Variable overhead cost = Direct labor dollars * Variable overhead cost per direct labor dollar

= $7,300,000 * $0.06

= $438,000

*Total overhead cost = Fixed overhead cost + Variable overhead cost

= $4,380,000 + $438,000

= $4,818,000

Ans. 2

Direct materials . $1,412,000

Direct labor . $2,190,000

Overhead applied . $1,445,400

Total Job Cost   ​​​​$5,047,400

*Working notes:

Overhead applied = Predetermined overhead rate * Actual Direct labor cost

= $0.66 * $2,190,000

= $1,445,400