Ginocera Inc. is a designer, manufacturer, anddistributor of custom gourment kitchen knives. A new kitchen knifeseries called the Kitchen Ninja was released for production inearly 20Y8. In January, the company spent $600,000 to develop alate-night advertising infomercial for the new product. During20Y8, the company spent an additional $1,400,000 promoting theproduct through these infomercials, and $800,000 in legal costs.The knives were ready for manufacture on January 1,20Y8.
Ginocera uses a job order cost system to accumulatecosts associated with the Kitchen Ninja Knife. The unit directmaterials cost for the knife is:
Hardened steel blanks | |
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(used for knife shaft and blade) | $4.00 |
Wood (for handle) | 1.50 |
Packaging | 0.50 |
The production process is straightforward. First, thehardened steel blanks, which are purchased directly from a rawmaterial supplier, are stamped into a single piece of metal thatincludes both the blade and the shaft. The stamping machinerequires one hour per 250 knives.
After the knife shafts are stamped, they are brought toan assembly area where an employee attaches the handle to the shaftand packs the knife into a decorative box. The direct labor cost is$0.50 per unit.
The knives are sold to stores. Each store is givenpromotional materials, such as posters and aisle displays.Promotional materials cost $60 per store. In addition, shippingcosts average $0.20 per knife.
Total completed production was 1,200,000 units duringthe year. Other information is as follows:
Number of customers (stores) | 60,000 |
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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 stamping machine hour after the knife blanks are stamped.There were an additional 25,000 stamped knives, handles, and casesin process and waiting to be assembled on December 31,20Y8.
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1. | Prepare an annual income statement for the KitchenNinja knife series, including supporting calculations, from theinformation provided. Refer to the list of Amount Descriptions forexact wording of the answer choices for textentries.* |
2. | Determine the balances in the work in process andfinished goods inventories for the Kitchen Ninja knife series onDecember 31, 20Y8.* | *In your computations, if required, round interimper-unit costs to two decimal places. |
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Income Statement
1. Prepare an annual income statement for theKitchen Ninja knife series, including supporting calculations, fromthe information provided. Refer to the list of Amount Descriptionsfor exact wording of the answer choices for text entries. In yourcomputations, if required, round interim per-unit costs to twodecimal places.
Ginocera Inc. |
Income Statement |
For the Year Ended December 31,20Y8 |
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