Flow of Costs and Income Statement Technology Accessories Inc. is a designer, manufacturer, and distributor of accessories for consumer electronic products. Early in 20Y3, the company began production of a leather cover for tablet computers, called the iLeather. The cover is made of stitched leather with a velvet interior and fits around most tablet computers. In January, $750,000 was spent on developing marketing and advertising materials. For the first six months of 2012, the company spent $1,400,000 promoting the iLeather. The product was ready for manufacture on January 21, 20Y3. Technology Accessories Inc. uses a job order cost system to accumulate costs for the iLeather. Direct materials unit costs for the iLeather are as follows: Leather $10.00 Velvet 5.00 Packaging 0.40 Total $15.40 The actual production process for the iLeather is fairly straightforward. First, leather is brought to a cutting and stitching machine. The machine cuts the leather and stitches an exterior edge into the product. The machine requires one hour per 125 iLeathers. After the iLeather is cut and stitched, it is brought to assembly, where assembly personnel affix the velvet interior and pack the iLeather 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 20% commission on the wholesale price for all sales. Total completed production was 500,000 units during the year. Other information is as follows: Number of iLeather units sold in 20Y3 460,000 Wholesale price per unit $40 Factory overhead cost is applied to jobs at the rate of $1,250 per machine hour. An additional 22,000 cut and stitched iLeathers were waiting to be assembled on December 31, 20Y3. In your computations, if required, round interim per unit costs to two decimal places. Required: 1. Prepare an annual income statement for the iLeather product. Technology Accessories Inc. Income Statement For the Year Ended December 31, 20Y3 Sales 18,400,000 Cost of goods sold 11,914,000 Gross profit $ 6,486,000 Selling expenses: Salespersons commissions 3,680,000 Advertising design 756,000 x Advertising expenses 1,409,000 x Total selling expenses 5,845,000 x Income from operations 641,000 X 2. Determine the balances in the finished goods and work in process inventories for the iLeather product on December 31, 20Y3. Finished Goods 1,036,00 Work in Process $ 558,800 Feedback Check My Work 2. Assign all the manufacturing costs per unit to the number of units in the finished goods inventory. Assign only manufacturing costs incurred per unit, to the units in the work in process inventory Feedback Check My Work Partially correct