1. Assume you have developed and tested a prototype electronic product and are about to start your new business. You purchase pre-programmed computer chips at $70 per unit. Other component costs include: plastic casings at $15 per unit and assembly hardware at $5 per unit. Direct labor costs are $15 per hour and three units can be produced per hour. You intend to sell each unit at a 50 percent mark-up over the total costs of producing each unit. The plan is to produce 500 product units per month in January, February, and March. Sales are expected to be: 200 units in January, 400 units in February, and 800 units in March. A. Calculate the dollar amount of sales revenue expected in each month (i.e., January, February, and March) and for the first quarter of the year. Computer chips Plastic casings Assembly hardware Direct labor ($15/3) Total costs Mark-up = $ () = Dollar Sales: January: February: March: First Quarter B. Prepare a cost of production schedule for January, February, and March. Cost of Production Schedule: Cost Per Unit January February March Production (units) 500 500 500 Production costs Computer chips Plastic casings Assembly hardware Direct labor Total costs C. Prepare a cost of goods sold schedule for each of the three months and for the first quarter of the year. Using your cost of goods sold estimates and the sales revenues expected in Part

A, calculate the gross earnings for January, February, and March, as well as for the first quarter of the year. Cost of Goods Sold Schedule: January February March Total Sales (units) 200 400 800 1,400 Costs @ $95/unit Gross Earnings Estimate: Sales (dollars) Less: cost of goods sold Gross earnings D. Prepare an inventories schedule for January, February, and March. Inventories Schedule: January February March Beginning finished goods Production Materials Direct labor Additions Total (beg. + additions) Less: cost of goods sold