Reference no: EM132749997
Questions -
Q1. The following production data were taken from the records of the Finishing Department for June:
Inventory in process, June 1 (37% completed) 4,900units
Completed units during June 55,500 units
Ending inventory (58% complete) 3,900 units
The number of materials equivalent units of production in the June 30 Finishing Department inventory, assuming that the first-in, first-out method is used to cost inventories and materials were added at the beginning of the process, is:
a. 54,500 units
b. 59,400 units
c. 50,600 units
Q2. 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, $750,000 was spent on developing marketing and advertising materials. For the first six months of 20Y3, the company spent an additional $1,400,000 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
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 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 500,000 units during the year. Other information is as follows:
Number of iLeather units sold in 20Y3 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, 20Y3.
In your computations, if required, round interim per unit costs to two decimal places.
Required -
1. Prepare an annual income statement for the iLeather product.
2. Determine the balances in the finished goods and work in process inventories for the iLeather product on December 31, 20Y3.