During Year 2, Baird Manufacturing Company incurred $101,200,000 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 2. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $54 per unit. Packaging, shipping, and sales commissions are expected to be $6 per unit. Baird expects to sell 2,200,000 batteries before new research renders the battery design technologically obsolete. During Year 2, Baird made 443,000 batteries and sold 396,000 of them. Required a. Identify the upstream and downstream costs. b. Determine the Year 2 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 Baird 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 2. 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 A Required B > 11
During Year 2, Baird Manufacturing Company incurred $101,200,000 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 2. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $54 per unit. Packaging, shipping, and sales commissions are expected to be $6 per unit. Baird expects to sell 2,200,000 batteries before new research renders the battery design technologically obsolete. During Year 2, Baird made 443,000 batteries and sold 396,000 of them. Required a. Identify the upstream and downstream costs. b. Determine the Year 2 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 Baird 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 2. 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 A Required B > 11
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Exercise 10-10A (Algo) Identifying upstream and downstream costs LO 10-4
During Year 2, Baird Manufacturing Company incurred $101,200,000 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 2. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $54 per unit. Packaging,
shipping, and sales commissions are expected to be $6 per unit. Baird expects to sell 2,200,000 batteries before new
research renders the battery design technologically obsolete. During Year 2, Baird made 443,000 batteries and sold 396,000
of them.
Required
a. Identify the upstream and downstream costs.
b. Determine the Year 2 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 Baird 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 2. 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 A
Required B >
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