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My Way Software

Price: $2.50

My Way Software Inc. is a designer, manufacturer, and distributor of software for
microcomputers. A new product, Movie Design 2010, was released for production and
distribution in early 2010. In January, $1,400,000 was spent to design print advertisement.
For the first six months of 2010, the company spent $1,380,000 promoting Movie
Design 2010 in trade magazines. The product was ready for manufacture on January
10, 2010. My Way uses a job order cost system to accumulate costs associated with each software
title. Direct materials unit costs are as follows

Blank CD  2.50
Packaging  4.00
Manual  12.00
Total  18.50

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 2,000 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 $0.50 per unit.
The completed packages are then sold to retail outlets through a sales force.
The sales force is compensated by a 15% commission on the wholesale price for all
Total completed production was 100,000 units during the year. Other information
is as follows:

Number of software units sold in 2010  80,000
Wholesale price per unit $100

Factory overhead cost is applied to jobs at the rate of $2,500 per copy machine hour.
There were an additional 4,000 copied CDs, packaging, and manuals waiting to be assembled
on December 31, 2010.

1. Prepare an annual income statement for the Movie Design 2010 product.

2. Determine the balances in the finished goods and work in process inventory for the
Movie Design 2010 product on December 31, 2010.

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