During year 1, Zachary Manufacturing Company incurred $102,900,000 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 $62 per unit. Packaging, shipping, and sales commissions are expected to be $11 per unit. Zachary expects to sell 2,100,000 batteries before new research renders the battery design technologically obsolete. During year 1, Zachary made 432,000 batteries and sold 410,000 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 Zachary desires to earn a profit margin that is equal to 25 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
During year 1, Zachary Manufacturing Company incurred $102,900,000 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 $62 per unit. Packaging, shipping, and sales commissions are expected to be $11 per unit. Zachary expects to sell 2,100,000 batteries before new research renders the battery design technologically obsolete. During year 1, Zachary made 432,000 batteries and sold 410,000 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 Zachary desires to earn a profit margin that is equal to 25 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
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 4PB: During the current year, Arkells Inc. made the following expenditures relating to plant machinery. ...
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Transcribed Image Text:During year 1, Zachary Manufacturing Company incurred $102,900,000 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 $62 per unit. Packaging, shipping, and sales
commissions are expected to be $11 per unit. Zachary expects to sell 2,100,000 batteries before new research renders the battery
design technologically obsolete. During year 1, Zachary made 432,000 batteries and sold 410,000 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 Zachary desires to earn a profit margin that is equal to 25 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
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