During year 1. Vernon Manufacturing Company incurred $111,800,000 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 $48 per unit. Packaging, shipping, and sales commissions are expected to be $14 per unit. Vernon expects to sell 2,600,000 batteries before new research renders the battery design technologically obsolete. During year 1, Vernon made 437000 batteries and sold 410,000 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 Vernon 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 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Determine the sales price assuming that Vernon desires to earn a profit margin that is equal to 25 percent of the total cost of developing, making, and distributing the batteries. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Sales price 131.50 Return to question 2 During year 1, Vernon Manufacturing Company incurred $111,800,000 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 $48 per unit. Packaging, shipping, and sales commissions are expected to be $14 per unit. Vernon expects to sell 2,600,000 batteries before new research renders the battery design technologically obsolete. During year 1, Vernon made 437,000 batteries and sold 410,000 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 Vernon 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 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required Prepare a GAAP-based income statement for year 1. Use the sales price developed in Requirement c. (Do not round intermediate calculations.) VERNON MANUFACTURING COMPANY Income Statement Sales revenue $ 63,915,000 Cost of goods sold 10.680,000 Gross margir 34 235.000 Research and development 111.800.000 Selling expenses 5,740.000 olololo Net Income poss) (63.305.009)
