Flow of Costs and Income Statement E-song Tunes Inc. is in the business of devel
ID: 2484449 • Letter: F
Question
Flow of Costs and Income Statement
E-song Tunes Inc. is in the business of developing, promoting, and selling children's videos. The company developed a new DVD video, called Jake the Sleepy Old Dog, on January 1, 2014. For the first six months of 2014, the company spent $1,655,500 on a media campaign for Jake the Sleepy Old Dog and $497,000 in legal costs. The video production began on February 1, 2014.
E-song Tunes uses a job order cost system to accumulate costs associated with a DVD video title. The unit direct materials cost for the video is:
The production process is straightforward. First, the blank DVDs are brought to a production area where the video is copied onto a DVD. The copying machine requires one hour per 1,140 DVDs.
After the DVDs are copied, they are brought to an assembly area where an employee packs the DVD in a case along with the story booklet and stuffed animal. The direct labor cost is $0.20 per unit.
The DVDs are sold to stores. Each store is given promotional materials, such as posters and aisle displays. Promotional materials cost $35 per store. In addition, shipping costs average $0.20 per DVD.
Total completed production was 473,000 units during the year. Other information is as follows:
Factory overhead cost is applied to jobs at the rate of $570 per copy machine hour after the videos are copied to the DVDs. There were an additional 118,250 copied DVDs, cases, story booklets, and stuffed animals waiting to be assembled on December 31, 2014.
In your computations, if required, round interim per unit costs to two decimal places.
Required:
1. Prepare an annual income statement for the Jake the Sleepy Old Dog video.
E-song Tunes Inc.
Income Statement
For the Year Ended December 31, 2014
$
$
Selling Expenses:
$
Total Selling Expenses
$
Administrative Expenses:
Total Operating Expenses
Income from Operations
$
2. Determine the balances in the work in process and finished goods inventory for the Jake the Sleepy Old Dog video on December 31, 2014.
DVD video $1.60 Case 0.50 Story booklet and stuffed animal 0.50Explanation / Answer
1)
Working
2)
Working
Finished goods = Beginning Finished Goods + Cost of Good Manufactured - Cost of Good sold
Finished goods = 0 + 1560900 - 1326930
Finished goods = 233970
E-song Tunes Inc. Income Statement For the Year Ended December 31, 2014 Sales (402100*14) 5629400 Cost of Good Sold 1326930 Gross Margin 4302470 Selling Expenses: Promotional materials cost (35*20100) 703500 shipping costs (402100*0.20) 80420 Advertising Expenses 1655500 Total Selling Expenses 2439420 Administrative Expenses: Legal Expenses 497000 Total Operating Expenses 2936420 Income from Operations 1366050Related Questions
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