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Question #2

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Flow of Costs and Income Statement 0.70 0.70 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 $621,000 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent $1,449,000 advertising the product through these infomercials. In addition, the company incurred $621,000 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 $2.00 shaft and blade) Wood (for handle) Packaging 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 1,080 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 $0.30 per unit. The knives are sold to stores. Each store is given promotional materials such as posters and aisle displays. Promotional materials cost $45 per store. In addition, shipping costs average $0.3 per knife. Total completed production was 460,000 units during the year. Other information is as follows: Number of customers (stores) 19,600 Number of knives sold 391,000 Wholesale price (to store) per knife Factory overhead cost is applied to jobs at the rate of $540 per stamping machine hour after the knife blanks are stamped. There were an additional 115,000 stamped knives, handles, and cases waiting to be assembled on December 31, 20Y8. $18 In your computations, if required, round interim per unit costs to two decimal places. 7,038,000 1,642,200 5,395,800 1. Prepare an annual income statement for the Kitchen Ninja knife series. Ginocera Inc. Income Statement For the Year Ended December 31, 2018 Sales Cost of goods sold Gross profit Selling expenses: Infomercial campaign 2,070,000 Promotional materials 882,000 Shipping expenses 117,300 Total selling expenses 3,069,300 Administrative expenses: Legal expenses 621,000 Total operating expenses 3,690,300 Income from operations 1,705,500 Feedback Check My Work 2. Determine the balances in the work in process and finished goods inventories for the Kitchen Ninja knife series on December 31, 2018. Finished Goods 448,500 X Work in Process Break-even analysis for a service company Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $32,000. Costs and expenses for the year were as follows: Cost of revenue $13,100 Selling, general, and administrative expenses 9,000 Depreciation 3,500 Assume that 75% of the cost of revenue and 25% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place. a. What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number. 75 X accounts b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar. 256 per account