Outdoor Software Inc. is a designer, manufacturer, anddistributor of software for microcomputers. A new product,Landscape 2008, was released for production and distribution inearly 2008. In January, $700,000 was spent to design printadvertisement. For the first six months of 2008, the companyspent $2,500,000 promoting Landscape 2008 in trademagazines. The product was ready for manufacture on January10, 2008.
Outdoor uses a job order cost system to accumulate costsassociated with each software title. Direct materials unitcosts are:
BlankCD 4.50
Packaging 8.50
Manual 11.00
Total 23.50
The actual production process for the software product is fairlystraightforward. First, blank CDs are brought to a CD copyingmachine. The copying machine requires 1 hour per 1,500CDs. After the program is copied onto the CD, the CD isbrought to assembly, where assembly personnel pack the CD andmanual for shipping. The direct labor cost for this work is$0.75 per unit. The completed packages are then sold to retailoutlets through a sales force. The sales force is compensatedby a 10% commission on the wholesale price for all sales.
Total complete production was 45,000 units during theyear. Other information is as follows:
Number of software units sold in2008 40,000
Wholesale price perunit 200.00
Factory overhead cost is applied to jobs at the rate of $1,200per copy machine hour. There were additional 1,000 copied CDspackaging, and manuals waiting to be assembled on December 31,2008.
Instructions:
- Prepare an annual income statement for the Landscape 2008 product, including supporting calculations, from thegiven information.
- Determine the balances in the finished goods and work in process inventory for the Landscape 2008 product on December 31,2008.