Ginocera Inc. is a designer, manufacturer, and distributor of custom gourment ki
ID: 2539769 • 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
Solution:
1.
Supporting calculations:
Sales: 1,128,000 units × $17 = $19,176,000
Cost of goods sold: 1,128,000 units × $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.
GINOCERA INC. INCOME STATEMENT For the year ended Decemer 31, 20x8 Sales 19176000 Cost of goods sold 9813600 Gross profit 9362400 Selling expenses: Informercial campaign 2002000 Promotional materials 3510000 Shipping expenses 169200 Total selling expenses 5681200 Administrative expenses: Legal expenses 819000 Total operating expenses 6500200 Income from operations 2862200Related Questions
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