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	$	7,840,000
Fixed overhead cost	$	4,704,000
Variable overhead cost per direct labor-dollar	$	0.11

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$1,370,000

Direct labor cost$2,352,000

Predetermined overhead rate ___________ per DL$

Direct material:

Direct Labor:

Overhead applied:

Total job cost:

Answer 1

Total variable overhead estimated=(0.11*7,840,000)=$862400

Total overhead estimated=Total variable overhead estimated+Total fixed overhead estimated

=862400+4,704,000

=$5566400

predetermined overhead rate=Total overhead estimated/Estimated direct labor

=5566400/7,840,000

=$0.71 per DL

Direct materials	1,370,000
Direct labor	2,352,000
Overhead applied=(Predetermined overhead rate*Actual direct labor cost) =(0.71*2,352,000)	$1669920
Total job cost	$5,391,920