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

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

Explanation / Answer

1. Calculate predetermine overhead rate :

Fixed predetermine overhead rate = 4704000/7840000 = 0.60 per labour dollar

Total predetermine overhead rate = 0.60+0.11 = 0.71 per labour dollar

2.Calculate total cost of film :

Direct material 1370000 Direct labour 2352000 Overhead applied (2352000*.71) 1669920 Total job cost 5391920

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