During year $1,$ Franklin Manufacturing Company incurred $$112,800,000$ 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 $$58$ per unit. Packaging, shipping, and sales

commissions are expected to be $$6$ per unit. Franklin expects to sell $2,400,000$ batteries before new research renders the battery

design technologically obsolete. During year $1,$ Franklin made $446,000$ batteries and sold $407,000$ 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 Franklin 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 $c.$

Complete this question by entering your answers in the tabs below.

Prepare a GAAP$-$based income statement for year $1.$ Use the sales price developed in Requirement $c.$

Note: Do not round intermediate calculations.

FRANKLIN MANUFACTURING COMPANY