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PR 19-5A. Flow of costs and income statement Obj. 2 Excel 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 $600,000 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent $1,400,000 advertising the product through these infomercials. In addition, the company incurred $800,000 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) Wood for handle) Packaging $4.00 1.50 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 250 knives. decorative box. The direct labor cost 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 is $0.50 per unit. The knives are sold to stores. Each store is given promotional materials such as posters and aisle displays. Promotional materials cost $60.00 per store. In addition, shipping costs average $0.20 per knife. Total completed production was 1,200,000 units during the year. Other information is as follows: Number of customers (stores) Number of knives sold Wholesale price (to store) per knife 60,000 1.120,000 $16 Factory overhead cost is applied to jobs at the rate of $800 per stamping machine hour after the knife blanks are stamped. There were an additional 25,000 stamped knives, handles, and cases waiting to be assembled on December 31, 20Y8. 1. GINOCERA INC. Income Statement For the Year Ended December 31, 20Y8 $ 17,920.000 10,864,000 $ 7,056,000 Sales Cost of goods sold Gross profit Selling expenses: Promotional materials Infomercial campaign Shipping expenses Total selling expenses Administrative expenses: Legal expenses Total operating expenses Income from operations $ 3,600,000 2,000,000 224,000 $ 5,824,000 800,000 6,624,000 432,000 $ $ 4.00 1.50 0.50 Cost of goods sold supporting calculation: Manufacturing cost per unit (knife): Direct materials: Hardened steel blanks Wood (for handle) Packaging Total direct materials Direct labor Factory overhead Total manufacturing cost per knife x Number of units sold Cost of goods sold 2. Finished goods inventory balance, December 31, 20Y8: Units produced Less: Units sold Units remaining in inventory x Manufacturing cost per unit Balance Work in process inventory balance, December 31, 20Y8: Additional units waiting for assembly x Direct materials and overhead per unit Balance
