Exercise 2: Early in the year, Joyce Vaughn founded Maliwan Engineering Co. for the purpose of manufacturing a special flow control valve that she had designed. Shortly after year-end, the company's accountant was injured in a skiing accident, and no year-end financial statements were prepared. However, the accountant had correctly determined the year-end inventories at the following amounts: units value EB value OB DM WIP FG 31,0 29,0 31,5 36,0 1000 21,0 15,0 While the accountant was in the hospital, Joyce improperly prepared the following income statement from the company's accounting records: net sales 271,0 COGS DM purchases 88,5 DL costs 54,0 MOH 94,5 S 24,4 G&A Total costs 59,6 net profit/loss 321,0 50,0 J. Vaughn was very disappointed in these operating results. He stated, "Not only did we lose more than 50,000 this year but look at our unit production costs. We sold 8,000 units this year at a cost of 237,000; tha amounts to a cost of close to 30 per unit. I know some of our competitors are able to manufacture similar valves for about 25 per unit. I don't need an accountant to know that this business is a failure." Instructions: a) Prepare a schedule of the cost of finished goods manufactured for the year. (As there were no beginning inventories, your schedule will start with "Manufacturing costs assigned to production:".) Show a supporting computation for the cost of direct materials used during the year. b) Compute the average cost per unit manufactured. c) Prepare a corrected income statement for the year, using the multiple-step format. If Maliwan has earned any operating income, assume an income tax rate of 30 percent. (Omit eamings per share figures.) d) Explain whether you agree or disagree with Joyce's remarks that the business is unprofitable and that its unit cost of production (30, according to J Vaughn) is much higher than that of competitors (around $25). If you disagree with her, explain any errors or shortcomings in her analysis.