PROBLEM 3A-5 Transaction Analysis LO3-5 Star Videos, Inc., produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 7 1 are given below. Because the videos differ in length and in complexity 7 of production, the company uses a job-order costing system to determine the cost of each video produced. Studio (manufacturing) overhead is charged to videos on the basis of camera-hours of activity. The company’s predetermined overhead rate for the year ($40 per camera-hour) is based on a cost formula that estimated $280,000 m manufacturing overhead for an estimated allocation base of 7,000 camera-hours. Any underapplied or overapplied overhead is closed to cost of goods sold. The following transactions were recorded for the year: Required: Using Exhibit 3A- 1 as your guide, prepare a transaction analysis that records all of the above transactions. Calculate the ending balances at December 31 for all balance sheet accounts. Using Exhibit 3A-3 as your guide, prepare a schedule of cost of goods manufactured for the year. If done correctly', your cost of goods manufactured should equal what amount mentioned in the transactions above 9 Using Exhibit 3A-4 as your guide, prepare a schedule of cost of goods sold for the year. If done correctly', your unadjusted cost of goods sold should equal what amount mentioned in the transactions above 9 Using Exhibit 3A-5 as your guide, prepare an income statement for the year. Film, costumes, and similar raw materials purchased on account SI83,000. Film, costumes, and other raw materials issued to production, S210,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect). Utility costs incurred (on account) in the production studio, S78,000. Depreciation recorded on the studio, cameras, and other equipment, S82,000. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration Advertising expense incurred (on account), S13L000. Salaries and wages paid in cash as follows: Prepaid insurance expired during the year, S7,000 (70% related to production of videos, and 30% related to marketing and administrative activities). Miscellaneous marketing and administrative expenses incurred (on account), S9,600. Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year. Videos that cost S565,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment. Sales for the year totaled S930,000 and were all on account. The total cost to produce the videos that were sold according to their job cost sheets was S610,000. Collections from customers during the year totaled S880,000. Payments to suppliers on account during the year, S515,000. Underapplied or overapplied overhead S ? .

Exercise 6-45 (Algo) Predetermined Overhead Rates and Product Profitability (LO 6-3, 4) Social Media, Inc. (SMI) has two services for users. Toot!, which connects tutors with students who are looking for tutoring services, and TiX, which can be used to buy, sell, or exchange event tickets. For the following year, SMI expects the following results. Toot! TiX Total Users 14,900 21,600 36,500 Revenues $ 1,950,000 $ 2,000,000 $ 3,950,000 Engineering hours 10,125 8,125 18,250 Engineering cost $ 830,625 $ 948,750 $ 1,779,375 Administrative costs $ 1,423,500 Required: a. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the engineering hours to allocate administrative costs. b. Based on the rates computed in requirement (a), what is the profit for each service? Required A Compute the predetermined overhead rate used to apply administrative costs to the two services assuming…

Problem 2-62 (Static) Prepare Statements for a Manufacturing Company (LO 2-2, 4) Mesa Designs produces a variety of hardware products, primarily for the do-it-yourself (DIY) market. As part of your job interview as a summer intern at Mesa, the cost accountant provides you with the following (fictitious) data for the year (in $000). Inventory information: 1/1/00 12/31/00 Direct materials $96 $110 Work-in-process 152 136 Finished goods 1,974 2,026 Other information: For the year ’00 Administrative costs $4,200 Depreciation (Factory) 5,560 Depreciation (Machines) 9,240 Direct labor 13,000 Direct materials purchased 10,300 Indirect labor (Factory) 3,340 Indirect materials (Factory) 960 Property taxes (Factory) 370 Selling costs 2,140 Sales revenue 60,220 Utilities (Factory) 1,060 Required: 1. Prepare a cost of goods sold statement. 2. Prepare an income statement.

Q#2 The ASF Corporation manufactures one product and accounts for costs by a job orders cost system You have obtained the following information for the year ended December 31 2010 from the Corporations books and records Total manufacturing cost added during 2010 was 1,000,000 Cost of goods manufactured was 970,000 Factory overhead was applied to work in process inventory at 80% of direct labor (applied factory overhead for the year 27% of the total manufacturing cost) Beginning work in process inventory January 1 was 80% of ending work-in – process inventory December 31 Required 1. Prepare a formal statement of cost good manufactured

Problem 3-13 (Algo) Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement [LO3-3] Superior Company provided the following data for the year ended December 31 (all raw materials are used in production as direct materials): Selling expenses $ 214,000 Purchases of raw materials $ 268,000 Direct labor ? Administrative expenses $ 159,000 Manufacturing overhead applied to work in process $ 373,000 Actual manufacturing overhead cost $ 355,000 Inventory balances at the beginning and end of the year were as follows: Beginning Ending Raw materials $ 54,000 $ 40,000 Work in process ? $ 24,000 Finished goods $ 39,000 ? The total manufacturing costs added to production for the year were $670,000; the cost of goods available for sale totaled $730,000; the unadjusted cost of goods sold totaled $669,000; and the net operating income was $33,000. The company’s underapplied or overapplied overhead is closed to Cost of Goods Sold.…

Question 1. Case 2. Book problem. Incomplete manufacturing costs, expenses and selling data for two different cases are shown below: Required: 1. Indicate the missing amount for each letter 2. Prepare a schedule of cost of goods manufactured 3. Prepare a schedule of cost of goods sold 4. Prepare an income statement (Optional) Case 1 Case 2 Raw materials used 9,600 g) Direct labor cost 5,000 8,000 Total Factory overhead 8,000 4,000 Total Manufacturing costs a) 16,000 Beginning work in process inventory 1,000 h) Ending work in process inventory b) 3,000 Sales revenue 24,500 i)…

Required information Exercise 10-36 & 10-37 (Algo) (LO 10-3, 4) Skip to question [The following information applies to the questions displayed below.] Hult Games buys electronic components for manufacturing from two suppliers, Milan Components and Dundee Parts. If the components are delivered late, the shipment to the customer is delayed. Delayed shipments lead to contractual penalties that call for Hult to reimburse a portion of the purchase price to the customer. During the past quarter, the purchasing and delivery data for the two suppliers showed the following. Milan Dundee Total Total purchases (cartons) 98,000 42,000 140,000 Average purchase price (per carton) $ 20.00 $ 22 $ 20.60 Number of deliveries 80 20 100 Percentage of late deliveries 25 % 10 % 22 % The Accounting Department recorded $602,700 as the cost of late deliveries to customers. Exercise 10-36 (Algo) Activity-Based Costing of Suppliers (LO…

Problem 18-1A Cost computation, classification, and analysis LO C2, C3 Skip to question [The following information applies to the questions displayed below.] Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $502 each. Costs 1. Plastic for casing—$19,000 2. Wages of assembly workers—$84,000 3. Property taxes on factory—$6,000 4. Accounting staff salaries—$41,000 5. Drum stands (1,000 stands purchased)—$35,000 6. Rent cost of equipment for sales staff—$24,000 7. Upper management salaries—$185,000 8. Annual flat fee for factory maintenance service—$14,000 9. Sales commissions—$27 per unit 10. Machinery depreciation, straight-line—$39,000

Communication The controller of New Wave Sounds Inc. prepared the following product profitability report for management, using activity-based costing methods for allocating both the factory overhead and the marketing expenses. As such, the controller has confidence in the accuracy of this report. Home Theater Speakers Wireless Speakers Wireless Headphones Total Sales 1,500,000 1,200,000 900,000 3,600,000 Cost of goods sold 1,050,000 720,000 810,000 2,580,000 Gross profit 450,000 480,000 90,000 1,020,000 Marketing expenses 600,000 120,000 72,000 792,000 Income from operations (150,000) 360,000 18,000 228,000 In addition, the controller interviewed the vice president of marketing, who provided the following insight into the company's three products: The home theater speakers are an older product that is highly recognized in the marketplace. The wireless speakers are a new product that was just recently bunched. The wireless headphones are a new technology that has no competition in the marketplace, and it is hoped that they will become an important future addition to the companys product portfolio. Initial indications are that the product is well received by customers. The controller believes that the manufacturing costs for all three products are in line with expectations. Based on the information provided: 1. Calculate the ratio of gross profit to sales and the ratio of income from operations to sales for each product. 2. Write a brief (one page) memo using the product profitability report and the calculations in (1) to make recommendations to management with respect to strategies for the three products.

Construct and interpret a product profitability report, allocating selling and administrative expenses Naper Inc. manufactures power equipment. Naper has two primary productsgenerators and air compressors. The following report was prepared by the controller for Napers senior marketing management for the year ended December 31: Generators Air Compressors Total Revenue 4,200,000 3,000,000 7,200,000 Cost of goods sold 2,940,000 2,100,000 5,040,000 Gross profit 1,260,000 900,000 2,160,000 Selling and administrative expenses 610,000 Income from operations 1,550,000 The marketing management team was concerned that the selling and administrative expenses were not traced to the products. Marketing management believed that some products consumed larger amounts of selling and administrative expense than did other products. To verify this, the controller was asked to prepare a complete product profitability report, using activity-based costing. The controller determined that selling and administrative expenses consisted of two activities: sales order processing and post-sale customer service. The controller was able to determine the activity base and activity rate for each activity, as follows: Activity Activity Base Activity Rate Sales order processing Sales orders 65 per sales order Post-sale customer service Service requests 200 per customer service request The controller determined the following activity-base usage information about each product: Generators Air Compressors Number of sales orders 3,000 4,000 Number of service requests 225 550 A. Determine the activity cost of each product for sales order processing and post-sale customer service activities. B. Use the information in (A) to prepare a complete product profitability report dated for the year ended December 31. Compute the gross profit to sales and the income from operations to sales percentages for each product. (Round to two decimal places.) C. Interpret the product profitability report. How should management respond to the report?

Classifying costs The following is a manufacturing cost report of Marching Ants Inc. Evaluate and correct this report. Marching Ants Inc. Manufacturing Costs For the Quarter Ended June 30 Materials used in production (including 56,200 of indirect materials) 607,500 Direct labor (including 84,400 maintenance salaries) 62,500 Factory overhead: Supervisor salariesplant 517,500 Heat, light, and power-plant 140,650 Sales salaries 348,750 Promotional expenses 315,000 Insurance and property taxesplant 151,900 Insurance and property taxescorporate offices 219,400 Depreciationplant and equipment 123,750 Depreciationcorporate offices 90,000 3,076,950

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