Service Cost Flows
Vente Marketing, Ltd., produces television advertisements for
businesses that are marketing products in the western provinces of
Canada. To achieve cost control, Vente Marketing uses a job cost
system similar to that found in a manufacturing organization. It
uses some different account titles:
Account | Replaces |
---|---|
Videos-in-Process | Work-in-Process |
Video Supplies Inventory | Manufacturing Supplies Inventory |
Cost of Videos Completed | Cost of Goods Sold |
Accumulated Depreciation, Studio Assets | Accumulated Depreciation, Factory Assets |
Studio Overhead | Manufacturing Overhead |
Vente Marketing does not maintain Raw Materials or Finished Goods Inventory accounts. Materials, such as props needed for videos, are purchased as needed from outside sources and charged directly to Videos-in-Process and the appropriate job. Videos are delivered directly to clients upon completion. The April 1, balances were as follows:
Video Supplies | $1,300 | ||
Videos-in-Process | 2,000 | ||
Studio Overhead | 250 | underapplied |
During April, Vente Marketing completed the following production
transactions:
1. Purchased video supplies costing $1,860 on account.
2. Purchased material for specific jobs costing $31,000 on
account.
3. Incurred direct labor costs of $65,000 and indirect labor costs
of $3,100.
4. Used production supplies costing $1,250.
5. Recorded studio depreciation of $7,500.
6. Incurred miscellaneous payables for studio overhead of
$2,200.
7. Applied studio overhead at a predetermined rate of $22 per
studio hour, with 520 studio hours.
8. Completed jobs costing $104,000 and delivered them directly to
clients.
(a.) Prepare "T" accounts showing the flow of costs through all
service accounts and Cost of Videos Completed.
Videos-in-Process | |||
---|---|---|---|
Bal. |
2,000 |
Answer | |
Answer | Answer | ||
Answer | Answer | ||
Answer | Answer |
Other Payables | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer |
Cost of Videos Completed | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer | ||
Answer | Answer |
Videos Supplies Inventory | |||
---|---|---|---|
Bal. |
1,300 |
Answer | |
Answer | Answer |
Studio Overhead | |||
---|---|---|---|
Bal. |
250 |
Answer | |
Answer | Answer | ||
Answer | Answer | ||
Answer | Answer | ||
Answer | Answer |
Accounts Payable | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer |
Wages Payable | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer |
Accumulated Depreciation-Studio Assets | |||
---|---|---|---|
Answer | Answer | ||
Answer | Answer |
(b.) Calculate the cost incurred as of the end of Apirl for the
incompete jobs still in process.
$Answer
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(a)
Videos-in-Process | |||
Bal. | 2000 | 104000 | |
31000 | 0 | ||
65000 | 0 | ||
11440 | 0 | ||
Other Payables | |||
0 | 2200 | ||
0 | 0 | ||
Cost of Videos Completed | |||
104000 | 0 | ||
0 | 0 | ||
0 | 0 | ||
Videos Supplies Inventory | |||
Bal. | 1300 | 1250 | |
1860 | 0 | ||
Studio Overhead | |||
Bal. | 250 | 11440 | |
3100 | 0 | ||
1250 | 0 | ||
7500 | 0 | ||
2200 | 0 | ||
Accounts Payable | |||
0 | 1860 | ||
0 | 31000 | ||
Wages Payable | |||
0 | 68100 | ||
0 | 0 | ||
Accumulated Depreciation-Studio Assets | |||
0 | 7500 | ||
0 | 0 |
7. Studio overhead applied = 520 x $22 = $11440
(b) Cost incurred as of end of April for the incomplete jobs still in process = $2000 + $31000 + $65000 + $11440 - $104000 = $5440
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