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Flow of Costs and Income Statement

Ginocera Inc. is a designer, manufacturer, and distributor of low-cost, high-quality stainless steel kitchen knives. A new kitchen knife series called the Kitchen Ninja was released for production in early 20Y8. In January, the company spent $316,800 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent $739,200 advertising the product through these infomercials. In addition, the company incurred $317,000 in legal costs. The knives were ready for manufacture on January 1, 20Y8.

Ginocera uses a job order cost system to accumulate costs associated with the kitchen knife. The unit direct materials cost for the knife is as follows:

Hardened steel blanks (used for knife shaft and blade)	$1.40
Wood (for handle)	0.50
Packaging	0.50

The production process is straightforward. First, the hardened steel blanks, which are purchased directly from a raw material supplier, are stamped into a single piece of metal that includes both the blade and the shaft. The stamping machine requires one hour per 840 knives.

After the knife shafts are stamped, they are brought to an assembly area where an employee attaches the handle to the shaft and packs the knife in a decorative box. The direct labor cost is $0.20 per unit.

The knives are sold to stores. Each store is given promotional materials such as posters and aisle displays. Promotional materials cost $30 per store. In addition, shipping costs average $0.2 per knife.

Total completed production was 352,000 units during the year. Other information is as follows:

Number of customers (stores)	15,000
Number of knives sold	299,200
Wholesale price (to store) per knife	$12

Factory overhead cost is applied to jobs at the rate of $420 per stamping machine hour after the knife blanks are stamped. There were an additional 88,000 stamped knives, handles, and cases waiting to be assembled on December 31, 20Y8.

In your computations, if required, round interim per unit costs to two decimal places.

Required:

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1. Prepare an annual income statement for the Kitchen Ninja knife series.

Ginocera Inc. Income Statement For the Year Ended December 31, 20Y8

Cost of goods soldFactory overheadGross profitIncomeSalesWork in processSales			$Sales
Cost of goods soldFinished goodsGross profitMaterialsSalesWork in processCost of goods sold			Cost of goods sold
Cost of goods soldFactory overheadGross profitInfomercial campaignNet incomeShipping expensesGross profit			$Gross profit
Selling expenses:
Cost of goods soldFactory overheadFinished goodsInfomercial campaignLegal expensesWork in processInfomercial campaign	$Infomercial campaign
Factory overheadFinished goodsLegal expensesPromotional materialsSalesWork in processPromotional materials	Promotional materials
Cost of goods soldFactory overheadFinished goodsLegal expensesWork in processShipping expensesShipping expenses	Shipping expenses
Total selling expenses		$fill in the blank 2c1b65088fc9f98_13
Administrative expenses:
Cost of goods soldFactory overheadInfomercial campaignLegal expensesPromotional materialsShipping expensesLegal expenses		Legal expenses
Total operating expenses			fill in the blank 2c1b65088fc9f98_16
Income from operations			$fill in the blank 2c1b65088fc9f98_17

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1. a. Calculate the sales revenue.

b. Calculate the manufacturing cost per unit (direct and indirect costs).

c. Assign all the manufacturing costs per unit to the number of units sold.

d. Assign all the promotional costs to the stores.

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2. Determine the balances in the work in process and finished goods inventories for the Kitchen Ninja knife series on December 31, 20Y8.

Finished Goods	$fill in the blank eccaedfcffdcfab_1
Work in Process	$fill in the blank eccaedfcffdcfab_2