My Way Software Inc. is a designer, manufacturer, and distributor of software for microcomputers. A new product,

Question:

My Way Software Inc. is a designer, manufacturer, and distributor of software for microcomputers. A new product, Movie Design 2010, was released for production and distribution in early 2010. In January, $1,400,000 was spent to design print advertisement. For the first six months of 2010, the company spent $1,380,000 promoting Movie Design 2010 in trade magazines. The product was ready for manufacture on January 10, 2010. My Way uses a job order cost system to accumulate costs associated with each software title. Direct materials unit costs are as follows:

Blank CD......$ 250

Packaging......... 4.00

Manual....... 12.00

Total.......$18.50

The actual production process for the software product is fairly straightforward. First, blank CDs are brought to a CD copying machine. The copying machine requires hour per 2,000 CDs. After the program is copied onto the CD, the CD is brought to assembly, where assembly personnel pack the CD and manual for shipping. The direct labor cost for this work is $0.50 per unit. The completed packages are then sold to retail outlets through a sales force. The sales force is compensated by a 15% commission on the wholesale price for all sales. Total completed production was 100,000 units during the year. Other information is as follows:

Number of software units sold in 2010.....80,000

Wholesale price per unit............ $100

Factory overhead cost is applied to jobs at the rate of $2,500 per copy machine hour. There were an additional 4,000 copied CDs, packaging, and manuals waiting to be assembled on December 31, 2010.

Instructions

1. Prepare an annual income statement for the Movie Design 2010 product, including supporting calculations, from the information above.

2. Determine the balances in the finished goods and work in process inventory for the Movie Design 2010 product on December 31, 2010.



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Accounting

ISBN: 978-0324662962

23rd Edition

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

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