Yancey Productions is a film studio that uses a job-order costing system. The co
ID: 2604526 • 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:
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:
Compute the total job cost for this particular film.
Direct labor-dollars to support all productions $ 8,050,000 Fixed overhead cost $ 4,830,000 Variable overhead cost per direct labor-dollar $ 0.23Explanation / Answer
Given Variable over head rate $ 0.23 per direct labour hour Direct labour dollars to all production $8,050,000 Fixed cost $4,830,000 Direct materials $1,284,000 Direct labour cost $2,415,000 Computation of Predermined Rate Fixed cost $4,830,000 Direct labour cost $8,050,000 Fixed overhead rate per direct labour dollar($4830000 / $8050000) $0.6 per direct labour dollar Predermined overhead rate = Variable overhead rate + Fixed overhead rate Predermined overhead rate (0.23+0.6) $0.83 per direct labour dollar Computation of Job Cost Direct material $1,284,000 Direct labour cost $2,415,000 Overhead cost ($2415000 X 0.83) $2,004,450 Total Job cost ($1284000+$2415000+$2004450) $5,703,450
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