Chapter 2, Problem 14E

EXERCISE 2−14 Job-Orders 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 ear, Yancey made the following estimates:

Direct labor-dollars to support all productions	$8,000,000
Fixed overhead cost	$4,800,000
Variable overhead cost per direct labor-dollar	$0.05

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	$1,259,000
Direct labor cost	$2,400,000

Compute the total job cost for this particular film.