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$500 per unit ials $175 per unit $45 per unit nufacturing overhead $40 per unit nanufacturing overhead $1,600,000 ing and administrative $30 per unit

$500 per unit ials $175 per unit $45 per unit nufacturing overhead $40 per unit nanufacturing overhead $1,600,000 ing and administrative $30 per unit

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Petoskey Electronics Company manufactures specialized products for boats and recreational vehicles using its newly introduced patented engine analytics device. The first-year revenues and costs for the product device are as follows: Selling price $500 per unit Direct materials $175 per unit Direct labor $45 per unit Variable manufacturing overhead $40 per unit Total fixed manufacturing overhead $1,600,000 Variable selling and administrative $30 per unit Total fixed selling and administrative $500,000 Sales and manufacturing volume 25,000 units The second year the product device was available, Petoskey Company sold only 12,000 units of its device, because a competitor, Charlevoix Supply Company, produced and sold an identical device. Petoskey Company decided to file a lawsuit against the competitor for damages (in the form of lost profits) caused by the patent infringement.
Transcribed Image Text:Petoskey Electronics Company manufactures specialized products for boats and recreational vehicles using its newly introduced patented engine analytics device. The first-year revenues and costs for the product device are as follows: Selling price $500 per unit Direct materials $175 per unit Direct labor $45 per unit Variable manufacturing overhead $40 per unit Total fixed manufacturing overhead $1,600,000 Variable selling and administrative $30 per unit Total fixed selling and administrative $500,000 Sales and manufacturing volume 25,000 units The second year the product device was available, Petoskey Company sold only 12,000 units of its device, because a competitor, Charlevoix Supply Company, produced and sold an identical device. Petoskey Company decided to file a lawsuit against the competitor for damages (in the form of lost profits) caused by the patent infringement.
REQUIRED: 1.) Calculate Petoskey Company's profit on this product device during the first year it was sold. 2.) Assume that Charlevoix Company is liable as alleged by Petoskey Company in the patent infringement lawsuit. Using a relevant analysis perspective, calculate the amount of damages that Petoskey Company experienced during the second year of the new product device as a result of Charlevoix's patent infringement. 3.) Assume that Charlevoix Company is liable as alleged by Petoskey Company in the patent infringement lawsuit. Also, in an effort to mitigate the damages caused by Charlevoix's patent infringement, Petoskey created an advertising program that resulted in sales decreasing to only 17,000 units (rather than the 12,000 units stated above). The annual cost of the advertising program was $375,000. Using a relevant analysis perspective, calculate the amount of damages that Petoskey Electronic experienced during the second year of the new product device as a result of Charlevoix's patent infringement. 4.) Briefly identify and explain any other relevant (or differential) items that might be included in estimating Petoskey Company's damages. 5.) Briefly explain how the differential analysis conducted by the forensic accountant at either Petoskey Company or Charlevoix Company relates to one of the four data analytic types (see Exhibits 2.5 and 2.6, pp. 37, 40, for a review of data analytics types.)
Transcribed Image Text:REQUIRED: 1.) Calculate Petoskey Company's profit on this product device during the first year it was sold. 2.) Assume that Charlevoix Company is liable as alleged by Petoskey Company in the patent infringement lawsuit. Using a relevant analysis perspective, calculate the amount of damages that Petoskey Company experienced during the second year of the new product device as a result of Charlevoix's patent infringement. 3.) Assume that Charlevoix Company is liable as alleged by Petoskey Company in the patent infringement lawsuit. Also, in an effort to mitigate the damages caused by Charlevoix's patent infringement, Petoskey created an advertising program that resulted in sales decreasing to only 17,000 units (rather than the 12,000 units stated above). The annual cost of the advertising program was $375,000. Using a relevant analysis perspective, calculate the amount of damages that Petoskey Electronic experienced during the second year of the new product device as a result of Charlevoix's patent infringement. 4.) Briefly identify and explain any other relevant (or differential) items that might be included in estimating Petoskey Company's damages. 5.) Briefly explain how the differential analysis conducted by the forensic accountant at either Petoskey Company or Charlevoix Company relates to one of the four data analytic types (see Exhibits 2.5 and 2.6, pp. 37, 40, for a review of data analytics types.)
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