Question

E-18-27 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 Videos in Process Video Supplies Inventory Cost of Videos Completed Accumulated Depreciation, Studio Assets Studio Overhead Replaces Work in Process Manufacturing Supplies Inventory Cost of Goods Sold Accumulated Depreciation, Factory Assets 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 $1,675 on account. 2. Purchased materials for specific jobs costing $27,000 on account. 3. Incurred direct labor costs of $65,000 and indirect labor costs of $3,100. 4. Used production supplies costing $850. 5. Recorded studio depreciation of $3,500. 6. Incurred miscellaneous payables for studio overhead of $1,800. 7. Applied studio overhead at a predeterimined rate of $18 per studio hour, with 520 studio hours. 8. Completed jobs costing $100,000 and delivered them directly to clients. Required a. Prepare “T” accounts showing flow of costs through all service accounts and Cost of Videos Completed. b. Calculate the cost incurred as of the end of April for the incomplete jobs still in process.

Answer 1

a. Prepare "T" Accounts showing flow of costs
Videos in Process
Balance	2000	100000	Vedios completed
Purchase	27000
Direct Labor	65000
Supplies used	850
Overhead applied	9360
Balance	4210
Video Supplies Inventory
Balance	1300	850	Supplies used
Purchase	1675
Balance	2125
Cost of Videos Completed
Vedio completed	100000
Accumulated Depreciation
		3500	Depreciation
Studio Overhead
Balance	250	9360	Overhead applies
Indirect Labor	3100
Depreciation	3500
Miscllaneous	1800
		710	Balance
b. Calculate the cost incurred at the end of April for the incomplete jobs still in process
Videos in Process
Balance	2000	100000	Vedios completed
Purchase	27000
Direct Labor	65000
Supplies used	850
Overhead applied	9360
Balance	4210