Required: 1. Prepare a transaction analysis that records all of the above transactions. 2. Prepare a schedule of cost of goods manufactured for the year. 3. Prepare a schedule of cost of goods sold for the year.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Star Videos, Inc., produces short musical videos for sale to retail outlets. The company’s
| Star Videos, Inc. | |||||
| Balance Sheet | |||||
| January 1 | |||||
| Assets | |||||
| Cash | $ | 81,800 | |||
| 104,400 | |||||
| Inventories: | |||||
| Raw materials (film, costumes) | $ | 17,200 | |||
| Videos in process | 57,400 | ||||
| Finished videos awaiting sale | 85,800 | 160,400 | |||
| Prepaid insurance | 12,650 | ||||
| Studio and equipment (net) | 588,000 | ||||
| Total assets | $ | 947,250 | |||
| Liabilities and |
|||||
| Accounts payable | $ | 203,000 | |||
| 744,250 | |||||
| Total liabilities and stockholders’ equity | $ | 947,250 | |||
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Because the videos differ in length and in complexity of production, the company uses a job-order costing system to determine the cost of each video produced. Studio (manufacturing)
- Film, costumes, and similar raw materials purchased on account, $195,500.
- Film, costumes, and other raw materials issued to production, $209,500 (85% of this material was considered direct to the videos in production, and the other 15% was considered indirect).
- Utility costs incurred (on account) in the production studio, $85,800.
Depreciation recorded on the studio, cameras, and other equipment, $106,000. 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 incurred (on account), $175,000.
- Salaries and wages paid in cash as follows:
| Direct labor (actors and directors) | $ | 89,200 |
| Indirect labor (carpenters to build sets, costume designers, and so forth) | $ | 82,500 |
| Administrative salaries | $ | 112,800 |
- Prepaid insurance expired during the year, $9,950 (70% related to production of videos, and 30% related to marketing and administrative activities).
- Miscellaneous marketing and administrative expenses incurred (on account), $10,350.
- Studio (manufacturing) overhead was applied to videos in production. The company recorded 7,250 camera-hours of activity during the year.
- Videos that cost $566,000 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 $1,000,000 and were all on account.
- The total cost to produce the videos that were sold according to their job cost sheets was $611,070.
- Collections from customers during the year totaled $950,000.
- Payments to suppliers on account during the year, $556,000.
- Underapplied or overapplied overhead $__?__.
Required:
1. Prepare a transaction analysis that records all of the above transactions.
2. Prepare a schedule of cost of goods manufactured for the year.
3. Prepare a schedule of cost of goods sold for the year.
4. Prepare an income statement for the year.
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