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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Flow of costs and income statement
R-Tunes Inc. is in the business of developing, promoting, and selling musical talent online and with compact discs (CDs). The company signed a new group, called Cyclone Panic, on January 1, 20Y8. For the first six months of 20Y8, the company spent $1,000,000 on a media campaign for Cyclone Panic and $175,000 in legal costs. The CD production began on April 1, 20Y8. R-Tunes uses a job order cost system to accumulate costs associated with a CD title. The unit direct materials cost for the CD is:

The production process is straightforward. First, the blank CDs are brought to a production area where the digital soundtrack is copied onto the CD. The copying machine can copy 3,600 CDs per hour.
After the CDs are copied, they are brought to an assembly area where an employee packs the CD with a case and song lyric insert. The direct labor cost is $0.37 per CD.
The CDs are sold to record stores. Each record store is given promotional materials, such as posters and aisle displays. Promotional materials cost $30 per record store. In addition, shipping costs average $0.28 per CD.
Total completed production was 500,000 CDs during the year. Other information is as follows:

Factory overhead cost is applied to jobs at the rate of $1,800 per copy machine hour. There were an additional 18,000 copied CDs, packages, and inserts waiting to be assembled on December 31, 20Y8.
Instructions

Determine the balances in the work-in-process and finished goods inventories for the Cyclone Panic CD on December 31, 20Y8.

To determine

Concept Introduction:

Work in process inventories are the one on which production is not completed and they are still in process of being finished goods.

Finished goods inventories are those on which the production is completed and are ready to sale.

To prepare:

The balances in work in process and finished goods inventories for the CP CD of R Inc for the year ended December 31,20Y8.

Explanation

Computation of balance in work in process inventories:

    ParticularsWorkingsAmount
      ($)
    Cost of blank CDs  Cost=($0.40×18,000)  7,200
    Cost of case  Cost=($0.25×18,000)  45,00
    Cost of song lyrics insert  Cost=($0

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