During year 1, Stuart Manufacturing Company incurred $111,800.000 of research and development (R&D) costs to manufacture a long-life battery to use in computers. In accordance with FASB standards the entire R&D costs was recognized as an expense in year 1. Manufacturing sots(direct materials, direct labor and overhead) are expected to be $64 per unit. Packaging, shipping and sales commissions are expected to be $10 per unit. Stuart expects to sell 2, 600,000 batteries before new research renders the battery design technology obsolete. During year 1, Stuart made 449,000 batteries and sold 397,000.

A. 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.

B. Determine the sales price assuming that Stuart desires to earn a profit of the total cost of developing, making and distributing the batteries.

C. Prepare a GAAP based income statement for year 1. Use the sales price developed in Requirement B