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Star Videos, Incorporated, produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1 are given below. Because
Star Videos, Incorporated, produces short musical videos for sale to retail outlets. The company's balance sheet accounts as of January 1 are given below. Because the videos differ in length and 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 based on 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 in manufacturing overhead for an estimated allocation base of 7,000 camera-hours. Underapplied or overapplied overhead is closed to cost of goods sold. The following transactions were recorded for the year: Required: 1. Prepare a transaction analysis that records all of the above transactions. 2. Prepare a schedule of cost of goods manufactured. 3. Prepare a schedule of cost of goods sold. 4. Prepare an income statement. a. Film, costumes, and similar raw materials purchased on account, $183,000. b. Film, costumes, and other raw materials issued to production, $210,000 ( 85% of this material was direct to the videos in production, and the other 15% was indirect). c. Utility costs incurred (on account) in the production studio, $78,000. d. Depreciation on the studio, cameras, and other equipment, $82,000. Three-fourths of this depreciation related to actual production of the videos, and the remainder related to equipment used in marketing and administration. e. Advertising expense incurred (on account), $131,000. f. Salaries and wages paid in cash as follows: g. Prepaid insurance expired, $7,000 (70\% related to production of videos, and 30% related to marketing and administrative activities). h. Miscellaneous marketing and administrative expenses incurred (on account), $9,600. i. Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity. j. Videos costing $565,000 were transferred to the finished videos warehouse. k. Sales for the year totaled $930,000 and were all on account. I. The total cost to produce the videos that were sold was $610,000. m. Collections from customers totaled $880,000. n. Payments to suppliers on account, $515,000. o. Underapplied or overapplied overhead \$
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