Question

Flow of Costs and Income Statement Technology Accessories Inc. is a designer, manufacturer, and distributor of accessories for consumer electronic products. Early in 20Y3, 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, $759,000 was spent on developing marketing and advertising materials. For the first six months of 20Y3, the company spent an additional $1,405,000 promoting the iLeather. The product was ready for manufacture on January 21, 20Y3. Technology Accessories Inc. uses a job order cost system to accumulate costs for the iLeather. 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 an exterior edge into the product. The machine requires one hour per 120 iLeathers. After the iLeather is cut and stitched, it is brought to assembly, where assembly personnel affix the velvet interior and pack the iLeather 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 iLeather units sold in 20Y3 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 20,000 cut and stitched iLeathers 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:

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

D Answer 2 Part 1) TechnoAccessories Inc. 4 Income Statement For the year ended december 31, 20Y3 6 Sales (40*500000) 7 Cost of goods sold ((15.4+.5+(1200/120))*500000) 8 Gross Profit 9 Selling expenses 20000000 12950000 7050000 Salespersons commission 10 4000000 Advertising Design 11 759000 Advertising Expenses Total selling expenses 1405000 12 6164000 13 14 Operating Income 886000 15 16 Cost per unit of cost of goods manufactured = material + labour + overheads = 15.4 +.5 +( 1200/120) =$ 25.9 17 18 19 20

Part 2) Finished goods = no. of units in finished goods * cost of goods manufactured %3D = 40000*25.9 =$ 1036000 %3D Work in process cost of 20000 units in work in process = no. of units in work in process * (material + labour) = 20000 * ( 15.4 +(1200/120)) =$ 508000 Thus the final answer $ 10,36,000 Finished Goods Work in Process 5,08,000