Exercise 2-14 Job-Order Costing for a Service Company [LO2-1, LO2-2, Lo2-3] Yanc

Question

Exercise 2-14 Job-Order Costing for a Service Company [LO2-1, LO2-2, Lo2-3] 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 $ 8,890,880 $ 5,334,000 0.13 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 1,436,000 $ 2,667,e Compute the total job cost for this particular film

Explanation / Answer

1) Predetermined Fixed OH rate = 5334000/8890000 = $               0.60 Variable OH cost per direct labor dollar $               0.13 Predetermined OH rate per labor dollar $               0.73 2) Direct materials $     1,436,000 Direct labor $     2,667,000 OH applied = 2667000*0.73 = $     1,946,910 Total job cost $     6,049,910

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