Question

Yancey Productions is 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. film studio that uses a job-order costing system. The company's direct materials consist of items such as At the beginning of the year, Yancey made the following estimates: $8,500,000 $ 5,100,000 Direct labor-dollars to support all productions Fixed overhead cost Variable overhead cost per direct labor-dollar 0.09 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: $ 1,380,000 $ 2,550,000 Direct materials Direct labor cost Compute the total job cost for this particular film.

Answer 1

Requirement 1

Predetermined overhead rate = $0.69 per direct labor dollars.

Working

Budgeted Fixed Overheads	$ 5,100,000
Budgeted Direct labor dollars	$ 8,500,000
Predetermined Overhead rate for fixed overheads	$ 0.60
Add: Variable overhead	$ 0.09
Predetermined Overhead rate	$ 0.69

Requirement 2

Cost of Job
Direct material	$ 1,380,000
Direct labor	$ 2,550,000
Overhead applied ((2550000 x 60%)+2550000/100 x .09)	$ 1,759,500
Total cost of Job	$ 5,689,500