Exercise 214 JobOrder Costing for a Service Company LO21 LO2

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 t all productions Fixed overhead cost Variable overhead cost per direct labor-dollar $ 8,050,000 4,830,000 0.23 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 $ 1,284,000 $ 2,415,000 Compute the total job cost for this particular film

Solution

Answer 1. Calculation of total Overhead: Fixed Overhead    4,830,000.00 Variable Overhead - $0.23 X $8,050,000    1,851,500.00 Total Overhead    6,681,500.00 Predetermined Overhead Rate = Estimated Total Manufacturing Overhead / Estimated Direct Labor Cost Predetermined Overhead Rate = $6,681,500 / $8,050,000 Predetermined Overhead Rate = $0.83 per Direct Labor $ (Approx.) Answer 2. Calculation of Total Job Cost: Direct Material    1,284,000.00 Direct Labor Costs    2,415,000.00 Ovrehead Applied - $2,415,000 X $0.83    2,004,450.00 Total Cost of Film    5,703,450.00