Question

Flow of Costs and Income Statement Technology Accessories Inc. is a designer, manufacturer, and distributor of accessories for consumer electronic products. Early in 2043, the company began production of a leather cover for tablet computers, called the iLeather. The cover is made of stitched leather with a velvet interior and fits snugly around most tablet computers. In January, $762,000 was spent on developing marketing and advertising materials. For the first six months of 2083, the company spent an additional $1,402,000 promoting the iLeathe The product was ready for manufacture on January 21, 2013. Technology Accessories Inc. uses a job order cost system to acoumulate costs for the Leather. Direct materials unit costs for the iLeather are as follows: Leather $10.00 5.00 Velvet Packaging 0.40 Total $15.40 The actual production process for the Leather is fairly straightforward. First, leather is brought to a cutting and stitching machine. The machine cuts the leather and stitches a exterior edge into the product. The machine requires one hour per 120 Leathers. After the iLeather is cut and stitched, it is brought to assembly, where assembly personnel affix the velvet interior and pack the Leather for shipping. The direct labor cost for this work is $0.50 per unit. The completed packages are then sold to retail outlets through a sales force. The sales force is compensated by a 20% commission on the wholesale price for all sales. Total completed production was 540,000 units during the year. Other information is as follows: Number of Leather units sold in 2013 500,000 Wholesale price per unit $40 Factory overhead cost is applied to jobs at the rate of $1,200 per machine hour. There were an additional 21,000 cut and stitched Leathers waiting to be assembled on December 31, 20Y3. In your computations, if required, round interim per unit costs to two decimal places and final answers to the nearest whole dollar. Required: 1. Prepare an annual income statement for the Leather product.

Answer 1

Technology Accessories Income Statement $ $ $ 20,000,000 500000 x 40 12,950,000 calculated below 7,050,000 Sales Revenue Cost of goods sold Gross profit Selling & Administrative Expenses: Salesperson Commission Advertising Design Advertising Expense Total Selling & Administrative Expense Net Income 20000000 x 20% $ $ $ 4,000,000 762,000 1,402,000 $ $ 6,164,000 886,000 Add Add Direct Material (500000 x 15.40) Direct Labor (500000 x 0.50) Factory Overhead (500000/120 x 1200) Cost of Goods Sold 7700000 250000 5000000 12950000 Total machine hours used = units sold / units per hour = 500000 / 120 = 4166.67 hours Factory oh is 1200 per machine hour. So Oh = 500000 / 120 x 1200