Technology Accessories Inc. is a designer, manufacturer, and distributor of accessories for consumer electronic products. Early in
Question:
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
Velvet .......... 5.00
Packaging ....... 0.40
Total .........$ 15.40
The actual production process for the iLeather 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 125 iLeatherss. 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 500,000 units during the year. Other information is as follows:
Number of iLeather units sold in 2014 .....460,000
Wholesale price per unit ........... $ 40
Factory overhead cost is applied to jobs at the rate of $ 1,250 per machine hour. There were an additional 22,000 cut and stitched iLeathers waiting to be assembled on December 31, 2014.
Instructions
1. Prepare an annual income statement for the iLeather product, including supporting calculations, from the information above.
2. Determine the balances in the finished goods and work in process inventories for the iLeather product on December 31, 2014.
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Related Book For
Financial and Managerial Accounting
ISBN: 978-1285078571
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
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