1. Prepare an annual income statement for the iLeather product.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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, $769,000 was spent on developing marketing and advertising materials. For the first six months of 20Y3, the company spent an additional $1,402,000 promoting the iLeather. The product was ready for manufacture on January 21, 20Y3.
Technology Accessories Inc. uses a
| 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 130 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 520,000 units during the year. Other information is as follows:
| Number of iLeather units sold in 20Y3 | 480,000 |
| Wholesale price per unit | $40 |
In your computations, if required, round interim per unit costs to two decimal places and final answers to the nearest whole dollar.
Required:
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1. Prepare an annual income statement for the iLeather product.
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$Sales | |
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Cost of Goods Sold | |
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$Gross Profit | |
| Selling Expenses: | ||
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$Salespersons Commissions | |
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Advertising Design | |
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Advertising Expenses | |
| Total Selling Expenses | fill in the blank 51ab88f4dfda04f_13 | |
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$Operating income |
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1.
a. Calculate the sales revenue.
b. Calculate the manufacturing cost per unit (direct and indirect costs).
c. Assign all the manufacturing costs per unit to the number of units sold.
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2. Determine the balances in the finished goods and work in process inventories for the iLeather product on December 31, 20Y3.
| Finished Goods | |
| Work in Process |
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2. Assign all the manufacturing costs per unit to the number of units in the finished goods inventory. Assign only manufacturing costs incurred per unit, to the units in the work in process inventory.
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