Ginocera Inc is a designer manufacturer and distributor of l

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 $354,000 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent $826,000 advertising the product through these infomercials. In addition, the company incurred $354,000 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:

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 720 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 $0.25 per unit.

The knives are sold to stores. Each store is given promotional materials such as posters and aisle displays. Promotional materials cost $40 per store. In addition, shipping costs average $0.25 per knife.

Total completed production was 295,000 units during the year. Other information is as follows:

Factory overhead cost is applied to jobs at the rate of $360 per stamping machine hour after the knife blanks are stamped. There were an additional 73,750 stamped knives, handles, and cases waiting to be assembled on December 31, 20Y8.

In your computations, if required, round interim per unit costs to two decimal places.

Required:

1. Prepare an annual income statement for the Kitchen Ninja knife series.

2. Determine the balances in the work in process and finished goods inventories for the Kitchen Ninja knife series on December 31, 20Y8.

Hardened steel blanks (used for knife shaft and blade)	$1.80
Wood (for handle)	0.60
Packaging	0.60

Solution

Ginocera Inc. Income Statement For the year ended Dec-31, 2018 Amount in $ Sales (16*250800) $4,012,800 Direct materials (250800 *3) $752,400 Direct labor(250800*0.25) $62,700 Stamping machine hours(250800/720) ( Rounded Off) 348 Factory overhead (348*360) $125,280 Cost of goods sold $940,380 Gross profit (Sales-Cost of goods sold) $3,072,420 Selling expenses: Infomercials campaign $826,000 Promotional materials (12500*$40) $500,000 Shipping expenses (250800*0.25) $62,700 Total selling expenses $1,388,700 Administrative expenses: Legal expenses $354,000 Total selling and administrative expenses $1,742,700 Income from operations $1,329,720 WIP 31st Dec 2018 WIP (73750 units) Amount $ Direct materials (73750*3) $221,250 Direct labour(0*0.5)(Not assembled)                -   Stamping machine hours(73750/720) ( Rounded Off) 102 Factory overhead (102*$360) $36,720 Total $257,970 Finished goods inventories 31st Dec 2018 Finished goods inventories (295000-250800) Amount $ Direct materials (44200*3) $132,600 Direct labour(44200*0.25) $11,050 Stamping machine hours(44200/720) ( Rounded Off) 61 Factory overhead (61*$360) $21,960 Total $165,610