Question

Ginocera Inc. is a designer, manufacturer, and distributor of custom gourment kitchen knives. A new kitchen knife series called the Kitchen Ninja was released for production in early 20Y8. In January, the company spent $605,000 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent an additional $1,412,000 promoting the product through these infomercials, and $816,000 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 Ninja Knife. The unit direct materials cost for the knife is: Hardened steel blanks (used for knife shaft and blade) $4.00 Wood (for handle) 1.55 Packaging 0.45 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 into a decorative box. The direct labor cost is $0.55 per unit. The knives are sold to stores. Each store is given promotional materials, such as posters and aisle displays. Promotional materials cost $60 per store. In addition, shipping costs average $0.15 per knife. Total completed production was 1,210,000 units during the year. Other information is as follows: Number of customers (stores) 58,500 Number of knives sold 1,135,000 Wholesale price (to store) per knife $16 Factory overhead cost is applied to jobs at the rate of $675 per stamping machine hour after the knife blanks are stamped. There were an additional 21,000 stamped knives, handles, and cases in process and waiting to be assembled on December 31, 20Y8. Required: 1. Prepare an annual income statement for the Kitchen Ninja knife series, including supporting calculations, from the information provided. Refer to the list of Amount Descriptions for exact wording of the answer choices for text entries.* 2. Determine the balances in the work in process and finished goods inventories for the Kitchen Ninja knife series on December 31, 20Y8.* *In your computations, if required, round interim per-unit costs to two decimal places and final answers to the nearest whole dollar.

Answer 1

1. Prepare an annual income statement for the Kitchen Ninja knife series, including supporting calculations, from the information provided.
ginocera inc
income statement
for the year ended dec 31
sales		18160000		1135000*16
less:COGS
direct mat.	6810000			1135000*6
direct labor	624250			1135000*0.55
factory overhead	3064500	10498750		1135000*2.7
GROSS PROFIT		7661250
less: selling expenses
informercial campaign	2017000			1412000+605000
promotional materials	3510000			58500*60
shipping costs	170250			1135000*0.15
total selling epense		5697250
less:administrative expenses
legal exspenses	816000
total administrative expenses		816000
total selling and administrative expenses		6513250
income from operations		1148000$

manufacturing cost per unit
direc mat
hardedned steel blank	4
wood	1.55
packaging	0.45
total	6
direct labor	0.55
factory overhead	2.7	675/250
manufacturing cost per unit	9.25$	per knife

2

Determine the balances in the work in process and finished goods inventories for the Kitchen Ninja knife series on December 31, 20Y8.
inventory of finished goods on dec 31	1210000-1135000	75000
manufacturing cost per unit		9.25
		693750$
work in process inventory		21000
manufacturing cost per unit	9.25-0.55	8.7	direct labor cost not added as they are waiting to be assembled yet.
		182700$

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