Question

Litewave Media, located in the Tampa/St. Petersburg Florida area was named the number one video production firm by 10 Best Production in July 2016. It is known throughout the industry as a premier full service video production company with over 10 years of experience in serving the film and video community. Litewave Media has a proven track record in production and marketing, from reality television shows to feature films to music videos. Though Litwave Media is based in Florida, the company has experience in film production throughout the world.

Because the videos differ in length and in complexity of production, Litewave Media 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. At the beginning of the year, the inventory balances were as follows:

Raw materials inventory (films, costumes) $30,000

Work in process inventory (videos in process) 45,000

Finished goods inventory (finished videos awaiting sale) 81,000

The following transactions were recorded for the year (2015):

Film, costumes, and similar raw materials purchased on account, $185,000.

Film, costumes, and other raw materials issued to production, $200,000 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect).

Costs for salaries and wages were incurred as follows:

Direct labor (actors and directors) $ 82,000

Indirect labor (carpenters to build sets,

costume designers, etc.) 110,000

Administrative salaries 95,000

Utility costs incurred in the production studio, $72,000

Depreciation recorded on the studio, cameras, and other equipment, $84,000. 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, $130,000.

Prepaid insurance expired during the year, $7,000 (80% related to production of videos, and 20% related to marketing and administrative activities).

Miscellaneous marketing and administrative expenses incurred, $8,600

Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year.

Videos that cost $550,000 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 $925,000 and were all on account. The total cost to produce these videos according to their job cost sheets was $600,000.

Collections from customers during the year totaled $850,000.

Payments to suppliers on account during the year, $500,000; payments to employees for salaries and wages, $285,000.

REQUIRED:

Prepare a schedule of cost of goods manufactured.

Prepare a schedule of cost of goods sold.

Prepare an income statement for the year.

Video Job 207 was one of the many jobs started and completed during the year. The job required $15,000 in direct materials, $6,000 in direct labor cost and used 145 camera hours. (You will need to calculate the MOH applied to the job.) If the company billed the job at 115% above the cost, what price would have been charged to the customer? Show all computations in your data block