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
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:
Instructions
Determine the balances in the work-in-process and finished goods inventories for the Cyclone Panic CD on December 31, 20Y8.
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Chapter 10 Solutions
Survey of Accounting (Accounting I)
- 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 Prepare an annual income statement for the Cyclone Panic CD, including supporting calculations, from the information above.arrow_forwardTopsy Company started a new promotional program. For every 10 box tops returned, customers receive a basketball. The entity estimate that the only 60% of the box tops reaching the market would be redeemed. Additional information is as follow: Units Amount Sales of Product 100,000 30,000,000 Basketballs purchased 5,500 4,125,000 Basketball Distributed 4,000 What is the amount of the year-end estimated liability associated with this promotion? а. 4,125,000 b. 1,500,000 c. 3,000,000 d. 4,500,000arrow_forwardB-You is a consulting firm that works with managers to improve their interpersonal skills. Recently, a representative of a high-tech research firm approached B-You's owner with an offer to contract for one year with B-You to improve the interpersonal skills of a newly hired manager. B-You reported the following costs and revenues during the past year. B-YOU Annual Income Statement Sales revenue $ 234,300 Costs Labor 111,000 Equipment lease 16,000 Rent 13,500 Supplies 10,300 Officers' salaries 70,000 Other costs 7,000 Total costs $ 227,800 Operating profit (loss) $ 6,500 If B-You decides to take the contract to help the manager, it will hire a full-time consultant at $84,000. Equipment lease will increase by 5 percent. Supplies will increase by an estimated 10 percent and other costs by 15 percent. The existing building has space for the new consultant. No new offices will be necessary for this work. Problem 1-44 (Algo) Part a…arrow_forward
- Assume RajanManufacturing Ltd makes sports vest for local soccer, baseball, basketball, and other sports teams. Rajan, the owner, purchases the vests and prints graphics on the vests for each team. The graphics were designed several years ago, so design costs are no longer incurred. On average, Rajan sells 1,000 vests each month. Typical monthly financial data is shown below: Per Unit Total Monthly Data at 1,000 Vests Sales revenue $20 $20 000 Variable costs: Direct materials $8 $8 000 Direct labour 2 2 000 Manufacturing overhead 3 13 3 000 13 000 Contribution margin $ 7 $ 7 000 Fixed costs (rent, salaries, etc.) 4 000 Profit $ 3 000 The monthly information provided relates to the company’s routine monthly operations. A representative of the local university recently approached Rajan to ask about a one-time special order.…arrow_forwardDifferential Analysis Report for Sales Promotion Proposal (SEE ATTACHMENT FOR QUESTION OVERVIEW, I started, but it's probably wrong) Rocket Shoe Company is planning a one-month campaign for August to promote sales of one of its two shoe products. A total of $98,000 has been budgeted for advertising, contests, redeemable coupons, and other promotional activities. The following data have been assembled for their possible usefulness in deciding which of the products to select for the campaign. Cross-TrainerShoe RunningShoe Unit selling price $70 $77 Unit production costs: Direct materials $ (13) $(17) Direct labor (4) (6) Variable factory overhead (3) (4) Fixed factory overhead (7) (8) Total unit production costs $(27) $(35) Unit variable selling expenses (23) (21) Unit fixed selling expenses (13) (8) Total unit costs $(63) $(64) Operating income per unit $ 7 $ 13 No increase in facilities would be necessary…arrow_forwardClassify costs Seymour Clothing Co. manufactures a variety of clothing types for distribution to several major retail chains. The following costs are incurred in the production and sale of blue jeans: Shipping boxes used to ship orders Consulting fee of 200,000 paid to industry specialist for marketing advice Straight-line depreciation on sewing machines Salesperson's salary, 10,000 plus 2% of the total sales Fabric Dye Thread Salary of designers Brass buttons Legal fees paid to attorneys in defense of the company in a patent infringement suit, 50,000 plus 87 per hour Insurance premiums on property, plant, and equipment, 70,000 per year plus 5 per 30,000 of insured value over 8,000,000 Rental costs of warehouse, 5,000 per month plus 4 per square foot of storage used Supplies Leather for patches identifying the brand on individual pieces of apparel Rent on plant equipment, 50,000 per year Salary of production vice president Janitorial services, 2,200 per month Wages of machine operators Electricity costs of 0.10 per kilowatt-hour Property taxes on property, plant, and equipment Instructions Classify the preceding costs as either fixed, variable, or mixed. Use the following tabular headings and place an X in the appropriate column. Identify each cost by letter in the cost column.arrow_forward
- Corazon Manufacturing Company has a purchasing department staffed by five purchasing agents. Each agent is paid 28,000 per year and is able to process 4,000 purchase orders. Last year, 17,800 purchase orders were processed by the five agents. Required: 1. Calculate the activity rate per purchase order. 2. Calculate, in terms of purchase orders, the: a. total activity availability b. unused capacity 3. Calculate the dollar cost of: a. total activity availability b. unused capacity 4. Express total activity availability in terms of activity capacity used and unused capacity. 5. What if one of the purchasing agents agreed to work half time for 14,000? How many purchase orders could be processed by four and a half purchasing agents? What would unused capacity be in purchase orders?arrow_forwardLeslie Sporting Goods is a locally owned store that specializes in printing team jerseys. The majority of its business comes from orders for various local teams and organizations. While Leslie's prints everything from bowling team jerseys to fraternity/sorority apparel to special event shirts, summer league baseball and softball team jerseys are the company's biggest source of revenue. A portion of Leslie's operating information for the company's last year follows: Number of Operating Month Jerseys Printed Cost $5,735 January February 200 205 5,830 8,690 9,800 March 575 April Мay 680 625 9,275 6,230 June 410 July August September October 390 6,140 5,940 4,810 230 180 305 6,005 5,960 4,955 November 235 December 190 Required: 3. Using the high-low method, calculate the store's total fixed operating costs and variable operating cost per jersey. 4. Using the high-low method results, calculate the store's expected operating cost if it printed 455 jerseys. 5. Perform a least-squares…arrow_forwardCompany XYZ is a smart phone merchant . The company purchases smart phones directly from themanufacturer and sells them to customers . During the month of April , the company purchased 50 smart phones and paid $700 for each one . The company managed to sell 45 smart phones during the same month for $1,000 each . The company incurred total Selling and Administrative costs of $4,000 of which 20 % is fixedcosts . Assume that XYZ did not have a beginning inventory during April , what was the gross margin ( $) for April ? a. 13,500 b. None of the given answers c. 10,300 d. 9,500 e. 6,800arrow_forward
- Assume Rajan Manufacturing Ltd makes sports vest for local soccer, baseball, basketball, and other sports teams. Rajan, the owner, purchases the vests and prints graphics on the vests for each team. The graphics were designed several years ago, so design costs are no longer incurred. On average, Rajan sells 1,000 vests each month. Typical monthly financial data is shown below: Per Unit Total Monthly Data at 1,000 Vests Sales revenue $20 $20 000 Variable costs: Direct materials $8 $8 000 Direct labour 2 2 000 Manufacturing overhead 3 13 3 000 13 000 Contribution margin $ 7 $ 7 000 Fixed costs (rent, salaries, etc.) 4 000 Profit $ 3 000 The monthly information provided relates to the company’s routine monthly operations. A representative of the local university recently approached Rajan to ask about a one-time special…arrow_forwardexecutives of Studio Recordings Inc. produced the latest compact disc by the Starshine Sisters Band, titledSunshine/Moonshine. The following cost informationpertains to the CD.a. CD package $1.25/CDb. Songwriters’ royalties $0.35/CDc. Recording artists’ royalties $1.00/CDd. Advertising and promotion $275,000e. Studio Recording Inc.’s overhead $250,000f. Selling price to the CD distributor $9.00Calculate the following:1. Contribution per CD unit2. Break-even volume in CD units and dollars3. Net profit if 1 million CDs are sold4. Necessary CD unit volume to achieve a $200,000profitarrow_forwardAssume Rajan Manufacturing Ltd makes sports vest for local soccer, baseball, basketball, and other sports teams. Rajan, the owner, purchases the vests and prints graphics on the vests for each team. The graphics were designed several years ago, so design costs are no longer incurred. On average, Rajan sells 1,000 vests each month. Typical monthly financial data is shown below: Per Unit Total Monthly Data at 1,000 Vests Sales revenue $20 $20 000 Variable costs: Direct materials $8 $8 000 Direct labour 2 2 000 Manufacturing overhead 3 13 3 000 13 000 Contribution margin $ 7 $ 7 000 Fixed costs (rent, salaries, etc.) 4 000 Profit $ 3 000 The monthly information provided relates to the company’s routine monthly operations. A representative of the local university recently approached Rajan to ask about a one-time special order. The university will be hosting a state-wide soccer event and is willing to pay Rajan’s Manufacturing $17 per shirt to make 200 custom vests for…arrow_forward
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