Orinoco, SA, produces and sells wireless reading devices. A competitor, Nile Electronic Products (NEP) sells similar wireless reading devices that it purchases at wholesale from

Sonex for €97 each. Both sell the devices for €170. In 20X9 Orinoco produced 10,000 devices at the following costs:

Assume that Orinoco had no beginning inventory of direct materials. Neither company had any beginning inventory of finished devices, but both had ending inventory of 1,000 finished devices. Ending work-in-process inventory for Orinoco was negligible. Each company sold 9,000 devices for €1,530,000 in 20X9 and incurred the following selling and administrative costs:

1. Prepare the inventories section of the balance sheet for December 31, 20X9, for Nile.

2. Prepare the inventories section of the balance sheet for December 31, 20X9, for Orinoco.

3. Using the cost of goods sold format on p. 127 as a model, prepare an income statement for the year 20X9 for Nile.

4. Using the cost of goods sold format on p. 127 as a model, prepare an income statement for the year 20X9 for Orinoco.

5. Summaries the differences between the financial statements of Nile, a merchandiser and Orinoco, a manufacturer.

6. What purpose of a cost management system is being served by reporting the items in requirements 1–4?

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Indirect production costs £41,000 Machine hours Material Commissions £5,000 £1,500 Custom detailed 1,400 machine hours 25,000 kilograms 1,000 windows sold at £30/unit Material Commissions £15,000 £3,500 Large standard 250 machine hours 75,000 kilograms 5,000 windows sold at £9/unit Distribution costs £10,400 Kilograms Material £20,000 Administrative salaries Other administrative costs Commissions £10,000 Small standard 400 machine hours 160,000 kilograms 20,000 windows sold at £4/unit £8,000 £4,000 Unallocated costs €12,000