Business Decision Case James Alvarez, an engineer, needs some accounting advice. In their spare time during the past year, Alvarez and his college-aged son, Robert, have manufactured a small weed-trimming sickle in a rented building near their home. Robert, who has had one accounting course in college, keeps the books. Alvarez is pleased about the results of their first year's operations. He asks you to look over the following income report prepared by Robert before they leave on a well-deserved vacation to Hawaii, after which they plan to expand their business significantly.

2 Managerial Accounting Concepts and Cost Flows - Cambridge Business Publishers YOUR KNOWLEDGE EYK2-1. Business Decision Case James Alvarez, an engineer, needs some accounting advice. In their spare time during the past year, Alvarez and his college-aged son, Robert, have manufactured a small weed-trimming sickle in a rented building near their home. Robert, who has had one accounting course in college, kecps the books. Alvarez is pleased about the results of their first year's operations. He asks you to look over the following income report prepared by Robert before they leave on a well-deserved vacation to Hawaii, after which they plan to expand their business significantly. After you examine the income report, Alvarez responds to your questions and assures you that (1) no theft or spoilage of materials has occurred, (2) no partially completed units are involved, and (3) he and his son Robert have averaged 30 hours each per week in the business for 50 weeks (ignoee income taxes). Required a. Identify any apparent discrepancy in the income report in the cost of materials used. b. Recalculate the cost of goods manufactured, the average cost per unit prodoced, and the net income for the year. c. What factors should James consider regarding the profitability of his venture before deciding to expand it significantly