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Yancey Productions is a film studio that uses a job-order costing system. The co

ID: 2510169 • Letter: Y

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:

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:

Compute the total job cost for this particular film.

Direct labor-dollars to support all productions $ 8,000,000 Fixed overhead cost $ 4,800,000 Variable overhead cost per direct labor-dollar $ 0.05

Explanation / Answer

Answer:-

Direct labor-dollars to support all productions = $ 8,000,000

Fixed overhead cost = $ 4,800,000

Overhead Rate for Fixed Cost per Direct Labour Dollar = 4,800,000 / 8,000,000

= $ 0.6

Variable overhead cost per direct labor-dollar = $ 0.5

Therefore,

Predetermined overhead rate per Direct Labour-Dollar = 0.6+0.5

= $ 1.1

Total Job Cost

Direct Materials = $ 1,259,000

Direct Labour Cost = $ 2,400,000

Overhead Cost = 2,400,000 * 1.1

= $ 2,640,000

Total Job Cost = 1,259,000 + 2,400,000 + 2,640,000

= $ 6,299,000