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 $ 4,380,000 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 $ 1,412,000 $ 2,190,000 Compute the total job cost for this particular film.

Answer 1

1.

Predetermined overhead rate = Variable overhead cost per direct labor hour +( Fixed overhead cost / Direct labor - dollars to support all productions)

= 0.06+(4,380,000/7,300,000)

= 0.06+0.6

= $0.66 per direct labor hour

Predetermined overhead rate

$0.66

per DLS

2.

Direct labor cost film You Can Say That Again = $2,190,000

Overhead applied = Direct labor cost film You Can Say That Again x Predetermined overhead rate

= 2,190,000 x 0.66

= $1,445,400

Direct materials	1,412,000
Direct labor	2,190,000
Overhead applied	1,445,400
Total job cost	$5,047,400

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