Exercise 1-10A (Algo) Identifying upstream and downstream costs LO 1-4 uring year 1, Adams Manufacturing Company incurred $90,300,000 of research and development (R&D) costs to create a long-life attery 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 $44 per unit. Packaging, shipping, and sales ommissions are expected to be $13 per unit. Adams expects to sell 2,100,000 batteries before new research renders the battery esign technologically obsolete. During year 1, Adams made 443,000 batteries and sold 407,000 of them. required Identify the upstream and downstream costs. 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. Determine the sales price assuming that Adams desires to earn a profit margin that is equal to 25 percent of the total cost of developing, making, and distributing the batteries. 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 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. stof goods sold ding inventory
Exercise 1-10A (Algo) Identifying upstream and downstream costs LO 1-4 uring year 1, Adams Manufacturing Company incurred $90,300,000 of research and development (R&D) costs to create a long-life attery 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 $44 per unit. Packaging, shipping, and sales ommissions are expected to be $13 per unit. Adams expects to sell 2,100,000 batteries before new research renders the battery esign technologically obsolete. During year 1, Adams made 443,000 batteries and sold 407,000 of them. required Identify the upstream and downstream costs. 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. Determine the sales price assuming that Adams desires to earn a profit margin that is equal to 25 percent of the total cost of developing, making, and distributing the batteries. 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 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. stof goods sold ding inventory
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 1-10A (Algo) Identifying upstream and downstream costs LO 1-4
During year 1, Adams Manufacturing Company incurred $90,300,000 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 $44 per unit. Packaging, shipping, and sales
commissions are expected to be $13 per unit. Adams expects to sell 2,100,000 batteries before new research renders the battery
design technologically obsolete. During year 1, Adams made 443,000 batteries and sold 407,000 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 Adams 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
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.
Cost of goods sold
Ending inventory
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