CASE 5-1 MICROIMAGE TECHNOLOGY, INC. ILO 1, 21 I expected a net loss but not this big. And I certainly didnt expeg a negative gross profit! It looks like the more we sell, the mon we'll lose. I hope you come to the investor meeting next week with some explanations and some better numbers. SP Warren: Microlmage Technology, Inc, produces miniature digital color cameras that can be attached to endoscopes and other medical devices. The cameras sell for $215 per unit and are disposed of after each use. For 2017, the company's first full year of operation, the company had sales of 80,000 units and a net loss of $9,810,000, as follows: In preparing for the meeting, Warren assembled the followingin. formation based on results for 2017: Units sold Selling price Manufacturing costs Microlmage Technology, Inc. Income Statement For the Year Ended December 31, 2017 80,000 80,000 $ 215 $17,200,000 Units produced Sales Less cost of goods sold Gross profit (loss) Less selling and 18,360,000 (1,160,000) S 1,280,000 1,200,000 Direct material costs Direct labor costs administrative expenses: Selling expense Administrative expense Net loss Variable manufacturing overhead: $3,750,000 4,900,000 160,000 00,000 Miscellaneous variable manufacturing overhead 320,000 Equipment maintenance Inspection costs 8,650,000 $ 9,810,000) Fixed manufacturing overhead: Rent The company is closely held, with six major inventors. Early in the first quarter of 2018, Warren Logan, company CFO, was pre- paring to meet with them to present profitability estimates for the coming 2 years. He expected the meeting to be somewhat hos- tile. Two days before, he had received an email from one of the investors, Sanjay Patel: 1,800,000 5,000,000 Depreciation Supervisory salaries Miscellaneous fixed manufacturing overhead 30000 $18,360,000