60.1K

Verified Solution

Link Copied!

part c and d

During year 1, Fanning Manufacturing Company incurred $127,600,000 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 $7 per unit. Fanning expects to sell 2,900,000 batteries before new research renders the battery design technologically obsolete. During year 1, Fanning made 438,000 batteries and sold 397,000 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 Fanning 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. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Determine the sales price assuming that Fanning desires to earn a profit margin that is equal to 25 percent of the total cost of developing, making, and distributing the batteries. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Sales price $ 86.25 During year 1, Fanning Manufacturing Company incurred $127,600,000 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 $7 per unit. Fanning expects to sell 2,900,000 batteries before new research renders the battery design technologically obsolete. During year 1, Fanning made 438,000 batteries and sold 397,000 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 Fanning 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. Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Prepare a GAAP-based income statement for year 1. Use the sales price developed in Requirement c. (Do not round intermediate calculations.) FANNING MANUFACTURING COMPANY Income Statement Sales revenue $ 34,241,250 Cost of goods sold Gross margin Research and development 24,164,000 X 10,077,250 127,600,000 Selling expenses 2,779,000 Net income (loss) (120,301,750)

Answer & Explanation Solved by verified expert

See Answer