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Designer Software

Price: $2.50

Designer Software Inc. is a designer, manufacturer, and distributor of software for
microcomputers. A new product, Design 2012, was released for production and
distribution in early 2012. In January, $1,250,000 was spent to design print advertisement.
For the first six months of 2010, the company spent 1,200,000 promoting Movie
Design 2012 in trade magazines. The product was ready for manufacture on January
10, 2012

Designer Software uses a job order cost system to accumulate costs associated with each software
title. Direct materials unit costs are as follows:

Blank CD  0.60
Packaging  1.00
Manual  6.40
Total  8.00

The actual production process for the software product is fairly straightforward.
First, blank CDs are brought to a CD copying machine. The copying machine requires
1 hour per 2,500 CDs.

After the program is copied onto the CD, the CD is brought to assembly, where assembly
personnel pack the CD and manual for shipping. The direct labor cost for this
work is 0.6 per unit.

The completed packages are then sold to retail outlets through a sales force.
The sales force is compensated by a 20% commission on the wholesale price for all

Total completed production was 250,000 units during the year. Other information
is as follows:

Number of software units sold in 2012 200,000
Wholesale price per unit $50

Factory overhead cost is applied to jobs at the rate of 3,000 per copy machine hour.
There were an additional 10,000 copied CDs, packaging, and manuals waiting to be assembled
on December 31, 2012

1. Prepare an annual income statement for the Movie Design 2012 product, including
supporting calculations, from the information above.
2. Determine the balances in the finished goods and work in process inventory for the
Design 2012 product on December 31, 2012.

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