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Exercise 10-10 Identifying upstream and downstream costs LO 10-4 During 2017, Adams Manufacturing Company incurred $90,000,000 of research and development (R&D) costs to create a

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Exercise 10-10 Identifying upstream and downstream costs LO 10-4 During 2017, Adams Manufacturing Company incurred $90,000,000 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 2017. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $42 per unit. Packaging, shipping, and sales commissions are expected to be $18 per unit. Adams expects to sell 2,000,000 batteries before new research renders the battery design technologically obsolete. During 2017, Adams made 436,000 batteries and sold 403,000 of them. Required a. Identify the upstream and downstream costs. b. Determine the 2017 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 Adams 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 2017. Use the sales price developed in Requirement c. 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 Adams 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

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