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$8,000,000Fixed overhead cost$4,800,000Variable overhead cost per direct labor-dollar$0.05

Required:

1. Compute the predetermined overhead rate.

2. During the year, Yancey produced a film titledYou Can Say That Againthat incurred the following costs:

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

Compute the total job cost for this particular film.