Concept explainers
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
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:
Instructions
- 1. Prepare an annual income statement for the iLeather product, including supporting computations, from the information provided.
- 2. Determine the balances in the finished goods and work in process inventories for the iLeather product on December 31, 20Y3.
Want to see the full answer?
Check out a sample textbook solutionChapter 2 Solutions
Managerial Accounting
- Bumblebee Mobiles manufactures a line of cell phones. The management has identified the following overhead costs and related cost drivers for the coming year. The following were incurred in manufacturing two of their cell phones, Bubble and Burst, during the first quarter. REQUIREMENT Review the worksheet called ABC that follows these requirements. You have been asked to determine the cost of each product using an activity-based cost system. Note that the problem information is already entered into the Data Section of the ABC worksheet.arrow_forwardOrman Company produces neon-colored covers for tablets (e.g., iPads). For last year, Orman reported the following: Last year, Orman produced 89,000 units and sold 90,500 units at 10.50 per unit. Required: 1. Prepare a statement of cost of goods manufactured. 2. Prepare an absorption-costing income statement.arrow_forwardHeavenly Chocolates manufactures and sells quality chocolate products at its plant and retail store located in Saratoga Springs, New York. Two years ago, the company developed a web site and began selling its products over the Internet. Web-site sales have exceeded the company’s expectations, and management is now considering strategies to increase sales even further. To learn more about the web-site customers, a sample of 50 Heavenly Chocolate transactions was selected from the previous month’s sales. Data showing the day of the week each transaction was made, the type of browser the customer used, the time spent on the web site, the number of web pages viewed, and the amount spent by each of the 50 customers are contained in the file named Heavenly Chocolates. A portion of the data is shown in the table that follows: Heavenly Chocolates would like to use the sample data to determine whether online shoppers who spend more time and view more pages also spend more money during their visit to the web site. The company would also like to investigate the effect that the day of the week and the type of browser have on sales. Managerial Report Use the methods of descriptive statistics to learn about the customers who visit the Heavenly Chocolates web site. Include the following in your report. Graphical and numerical summaries for the length of time the shopper spends on the web site, the number of pages viewed, and the mean amount spent per transaction. Discuss what you learn about Heavenly Chocolates’ online shoppers from these numerical summaries. Summarize the frequency, the total dollars spent, and the mean amount spent per transaction for each day of week. Discuss the observations you can make about Heavenly Chocolates’ business based on the day of the week? Summarize the frequency, the total dollars spent, and the mean amount spent per transaction for each type of browser. Discuss the observations you can make about Heavenly Chocolates’ business based on the type of browser? Develop a scatter diagram, and compute the sample correlation coefficient to explore the relationship between the time spent on the web site and the dollar amount spent. Use the horizontal axis for the time spent on the web site. Discuss your findings. Develop a scatter diagram, and compute the sample correlation coefficient to explore the relationship between the number of web pages viewed and the amount spent. Use the horizontal axis for the number of web pages viewed. Discuss your findings. Develop a scatter diagram, and compute the sample correlation coefficient to explore the relationship between the time spent on the web site and the number of pages viewed. Use the horizontal axis to represent the number of pages viewed. Discuss your findings.arrow_forward
- Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controllers department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity. Required: 1. Prepare a scattergraph, plotting the receiving costs against the number of purchase orders. Use the vertical axis for costs and the horizontal axis for orders. 2. Select two points that make the best fit, and compute a cost formula for receiving costs. 3. Using the high-low method, prepare a cost formula for the receiving activity. 4. Using the method of least squares, prepare a cost formula for the receiving activity. What is the coefficient of determination?arrow_forwardAllocating indirect costs and computing income, service company Pacific, Inc. is a technology consulting firm focused on website development and integration of Internet business applications. The president of the company expects to incur $775,000 of indirect costs this year, and she expects her firm to work 5,000 direct labor hours. Pacific's systems consultants provide direct labor at a rate of $310 per hour. Clients are billed at 160% of direct labor cost. Last month, Pacific's consultants spent 150 hours on Crockett's engagement. Requirements 1. Compute Pacific's predetermined overhead allocation rate per direct labor hour. 2. Compute the total cost assigned to the Crockett engagement. 3. Compute the operating income from the Crockett engagement.arrow_forwardHello the question below: The Oak Rocking chair company manufactures and sells rockers to Walmart. The Seat & Arm Department produces the chair seats and arms and transfers the parts to the Assembly Department where the chairs are assembled. This problem focuses on the Assembly Department. During February, the firm's Assembly Department had 15,000 chairs in beginning inventory on Feb 1 and started production of 75,000 chairs during February. During the month, the firm completed 80,000 chairs. The Assembly department had 10,000 chairs in ending inventory on Feb 28. Direct materials (screws, glue, etc) are added when the chairs are 50% complete and conversion costs are added uniformly throughout the production process. Beginning work in process was 30% complete as to conversion costs, while ending work in process was 80% complete as to conversion costs. The FIFO method of process costing is used. What is the TOTAL Equivalent Units for Transferred In (TI)? What is the TOTAL…arrow_forward
- Office Products Inc. manufactures and sells various high-tech office automation products. Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a “super chip,” that can be used by both the Computer Division and other external customers. The following information is available on this month’s operations in the Computer Chip Division: Selling price per chip P50 Monthly capacity 10,000 chips Variable costs per chip P20 External sales 6,000 chips Fixed production costs P60,000 Internal sales 0 chips Fixed SG&A costs P90,000 Presently the Computer Division purchases no chips from the Computer Chips Division, but instead pays P45 to an external supplier for the 4,000 chips it needs each month.…arrow_forwardOffice Products Inc. manufactures and sells various high-tech office automation products. Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a “super chip,” that can be used by both the Computer Division and other external customers. The following information is available on this month’s operations in the Computer Chip Division: Selling price per chip P50 Monthly capacity 10,000 chips Variable costs per chip P20 External sales 6,000 chips Fixed production costs P60,000 Internal sales 0 chips Fixed SG&A costs P90,000 Presently the Computer Division purchases no chips from the Computer Chips Division, but instead pays P45 to an external supplier for the 4,000 chips it needs each month. 1.…arrow_forwardDance Creations manufactures authentic Hawallan hula skirts that are purchased for traditional Hawallan celebrations, costume parties, and other functions. During its first year of business, the company incurred the following costs: variable Cost per Hula skirt Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative expenses Fixed Costs per Month $ 9.75 3.55 Fixed manufacturing overhead Fixed selling and administrative expenses Dance Creations charges $31 for each skirt that it sells. During the first month of operation, it made 1,540 skirts and sold 1,420. 1.20 0.60 Required 1 Required 2 Required: 1. Assuming Dance Creations uses variable costing, calculate the variable manufacturing cost per unit for last month. 2. Complete a contribution margin income statement for the last month. 3. Assuming Dance Creations uses full absorption costing, calculate the full manufacturing cost per unit for the last month. 4. Complete a full absorption costing…arrow_forward
- Happy Hula manufactures authentic Hawaiian hula skirts that are purchased for traditional Hawaiian celebrations, costume parties, and other functions. During its first year of business, the company incurred the following costs: Variable Cost per Hula Skirt Direct materials $ 7.35 Direct labor 2.50 Variable manufacturing overhead 1.05 Variable selling & administrative expenses 0.40 Fixed cost per Month Fixed manufacturing overhead $15,900 Fixed selling and administrative expenses 4,950 Happy Hula charges $30 for each skirt that it sells. During the first month of…arrow_forwardOffice Products Inc. manufactures and sells various high-tech office automation products. Two divisions of Office Products Inc. are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a “super chip,” that can be used by both the Computer Division and other external customers. The following information is available on this month’s operations in the Computer Chip Division: Selling price per chip P50 Monthly capacity 10,000 chips Variable costs per chip P20 External sales 6,000 chips Fixed production costs P60,000 Internal sales 0 chips Fixed SG&A costs P90,000 Presently the Computer Division purchases no chips from the Computer Chips Division, but instead pays P45 to an external supplier for the 4,000 chips it needs each month. If…arrow_forwardNeely Systems Corporation manufactures and sells various high-tech office automation products. Two divisions of Neely Systems Corporation are the Computer Chip Division and the Computer Division. The Computer Chip Division manufactures one product, a "super chip," that can be used by both the Computer Division and other external customers. The following information is available on this month's operations in the Computer Chip Division: Selling price per chip $50 Variable costs per chip $20 Fixed production costs $60,000 Fixed SG&A costs $90,000 Monthly capacity 10,000 chips External sales 6,000 chips Internal sales 0 chips Presently, the Computer Division purchases no chips from the Computer Chips Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each month. Refer to Neely Systems Corporation. Assume, for this question only, that the Computer Chip Division is selling all that it can produce to external buyers for $50 per…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubExcel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage LearningEssentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning