Flow of Costs and Income Statement

Accounts, Labels and Amount Descriptions

Income Statement

Instructions

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 $1,20$ Y$8.$

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$)$ $$4\mathrm{.}00$

Wood $($for handle$),1\mathrm{.}50$

Packaging $,0\mathrm{.}50$

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.

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\mathrm{.}50$ per unit.

The knives are sold to stores. Each store is given promotional materials such as posters and aisle displays. Promotional materials cost $$60\mathrm{.}00$ per store. In addition, shipping costs average $$0\mathrm{.}20$ per knife.

Total completed production was $1,200,000$ units during the year.

Other information is as follows:

$$ Number of customers$($stores$)60,000$

$$ Number of knives sold $1,120,000$

$$ Wholesale price$($to store$)$ per knife $$16$

Factory overhead cost is applied to jobs at the rate of $$800$ per stampi by machine hour after the knife blanks are stamped. There were an additional $25,000$ stamped knives, handles, and cases waiting to be assembled on Decemeber $31,20$Y$8.$

$$ Prepare an annual incoke statement for Kitchen Ninja knife series, including supporting calculations, from the information provided. Be sure to complete the statement heading.

$$ determing the balances in the work in process and finished goods inventories for the akitchen Ninja Knife series on December $31,20$Y$8.$