During year 1, Finch Manufacturing Company incurred $116,100,000 of research and development (R&D) costs to create a long-life battery to use in computers. In accordance with FASB standards, the entire R&D cost was recognized as an expense in year 1. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $50 per unit. Packaging, shipping, and sales commissions are expected to be $20 per unit. Finch expects to sell 2,700,000 batteries before new research renders the battery design technologically obsolete. During year 1, Finch made 443,000 batteries and sold 393,000 of them. Required a. Identify the upstream and downstream costs. b. Determine the year 1 amount of cost of goods sold and the ending inventory balance that would appear on the financial statements that are prepared in accordance with GAAP. c. Determine the sales price assuming that Finch desires to earn a profit margin that is equal to 20 percent of the total cost of developing, making, and distributing the batteries. d. Prepare a GAAP-based income statement for year 1. Use the sales price developed in Requirement c. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Identify the upstream and downstream costs. 1. Research and development 2. Packaging 3, Shipping 4. Sales commissions Required B
During year 1, Finch Manufacturing Company incurred $116,100,000 of research and development (R&D) costs to create a long-life battery to use in computers. In accordance with FASB standards, the entire R&D cost was recognized as an expense in year 1. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $50 per unit. Packaging, shipping, and sales commissions are expected to be $20 per unit. Finch expects to sell 2,700,000 batteries before new research renders the battery design technologically obsolete. During year 1, Finch made 443,000 batteries and sold 393,000 of them. Required a. Identify the upstream and downstream costs. b. Determine the year 1 amount of cost of goods sold and the ending inventory balance that would appear on the financial statements that are prepared in accordance with GAAP. c. Determine the sales price assuming that Finch desires to earn a profit margin that is equal to 20 percent of the total cost of developing, making, and distributing the batteries. d. Prepare a GAAP-based income statement for year 1. Use the sales price developed in Requirement c. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Identify the upstream and downstream costs. 1. Research and development 2. Packaging 3, Shipping 4. Sales commissions Required B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:During year 1, Finch Manufacturing Company incurred $116,100,000 of research and development (R&D) costs to create a long-life
battery to use in computers. In accordance with FASB standards, the entire R&D cost was recognized as an expense in year 1.
Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $50 per unit. Packaging, shipping, and sales
commissions are expected to be $20 per unit. Finch expects to sell 2,700,000 batteries before new research renders the battery
design technologically obsolete. During year 1, Finch made 443,000 batteries and sold 393,000 of them.
Required
a. Identify the upstream and downstream costs.
b. Determine the year 1 amount of cost of goods sold and the ending inventory balance that would appear on the financial statements
that are prepared in accordance with GAAP.
c. Determine the sales price assuming that Finch desires to earn a profit margin that is equal to 20 percent of the total cost of
developing, making, and distributing the batteries.
d.
Prepare a GAAP-based income statement for year 1. Use the sales price developed in Requirement c.
Complete this question by entering your answers in the tabs below.
Required A Required B Required C Required D
Identify the upstream and downstream costs.
1. Research and development
2. Packaging
3. Shipping
4. Sales commissions.
Required B >
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