Question

Flow of Costs and Income Statement

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 $355,200 to develop a late-night advertising infomercial for the new product. During 20Y8, the company spent $828,800 advertising the product through these infomercials. In addition, the company incurred $355,000 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:

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

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 296,000 units during the year. Other information is as follows:

Number of customers (stores)	12,600
Number of knives sold	251,600
Wholesale price (to store) per knife	$16

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 74,000 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.

Answer 1