Ginocera Inc. is a designer, manufacturer, and distributor of custom gourment ki
ID: 2438120 • Letter: G
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 $600,000 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent an additional $1,402,000 promoting the product through these infomercials, and $819,000 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) Wood (for handle) Packaging $3.85 1.40 0.40 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 $0.45 per unit.Explanation / Answer
Answers
(1).
The GINOCERA INC.
The INCOME STATEMENT
For the year ended December 31, 20x8
Sales
19176000
Cost of goods sold
9813600
Gross profit
9362400
Selling expenses:
Infomercial campaign
2002000
Promotional materials
3510000
Shipping expenses
169200
Total selling expenses
5681200
Administrative expenses:
Legal expenses
819000
Total operating expenses
6500200
Income from operations
2862200
Supporting calculations:
Sales: 1,128,000 units × $17 = $19,176,000
Cost of goods sold: 1,128,000 unit’s × $8.70 = $9,813,600
Manufacturing cost per unit (Knife):
Direct materials:
Hardened Steel Blanks…………………………………$3.85
Wood (for handle)……………………………………… 1.40
Packaging…………………………………………………… 0.40
Total direct materials………………………………… $5.65
Direct labor………………………………………………… 0.45
Factory overhead*……………………………………… 2.60
Total manufacturing cost per knife…………… $8.70
* $650 ÷ 250 knives per hour
Infomercial campaign = $1,402,000 + $600,000 = $20,020,000
Promotional materials: 58,500 stores × $60 = $3,600,000
Shipping expenses: 1,128,000 units × $0.15 = $169,200
(2).
Finished Goods balance, December 31, 20x8: (1,200,000 units – 1,128,000 units) × $8.70 = $626,400
Work in Process, December 31, 20x8: 28,000 units × ($5.65 + $2.60) = $231,000
The materials, stamping, and factory overhead have already been applied to the 28,000 units. Only the direct assembly labor has yet to be applied for these units.
The GINOCERA INC.
The INCOME STATEMENT
For the year ended December 31, 20x8
Sales
19176000
Cost of goods sold
9813600
Gross profit
9362400
Selling expenses:
Infomercial campaign
2002000
Promotional materials
3510000
Shipping expenses
169200
Total selling expenses
5681200
Administrative expenses:
Legal expenses
819000
Total operating expenses
6500200
Income from operations
2862200
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