Raw materials (film, costumes) Videos in process Finished videos awaiting sale Prepaid insurance Total current assets Studio and equipment Less accumulated depreciation Total assets Liabilities and Stockholders' Equity $ 30,000 45,000 81,000 156,000 9,000 730,000 210,000 330,000 520,000 $ 850,000 Accounts payable $ 160,000 Capital stock Retained earnings $ 420,000 270,000 690,000 Total liabilities and stockholders' equity $ 850,000 Because the videos differ in length and in complexity 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 is based on a cost formula that estimated $280,000 in manufacturing overhead for an estimated allocation base of 7,000 camera-hours. The following transactions occurred during the year: a. Film, costumes, and similar raw materials purchased on account, $185,000. b. Film, costumes, and other raw materials used in production, $200,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect). c. Utility costs incurred in the production studio, $72,000. d. Depreciation recorded on the studio, cameras, and other equipment, $84,000. Three-fourths of this depreciation related to production of the videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense incurred on account, $130,000. f. Costs for salaries and wages were incurred as follows: Direct labor (actors and directors) Indirect labor (carpenters to build sets, costume designers, and so forth) Administrative salaries $82,000 $110,000 $ 95,000 g. Prepaid insurance expired during the year, $7,000 (80% related to production of videos, and 20% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred, $8,600. 1. Studio (manufacturing) overhead was applied to videos in production. The company used 7,250 camera-hours during the year. J. Videos that cost $550,000 to produce according to their job cost sheets were transferred to the finished videos warehouse to await sale and shipment. k. Sales for the year totaled $925,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $600,000. 1. Collections from customers during the year totaled $850.000.