"I was sure that when our battery hit the market it would be an instant success," said Roger Strong, founder and president of Solar Technology, Inc. "But just look at the gusher of red ink for the first quarter. It's obvious that we're better scientists than we are businesspeople. The data to which Roger was referring follow SOLAR TECHNOLOGY, INC. Income Statement For the Quarter Ended March 31 $950,000 Sales ($2,000 batteries) Less operating expenses Selling and administrative s Advertising Maintenance, production Indirect labor cost Cleaning supplies, production Purchases of raw materials Rental cost, facilities Insurance, prodaction Depreciation office equipment Utilities Depreciation, production equipment Direct labor cost Travel, Salespersons Total operating expenses Net loss $110,000 90.000 43.000 120.000 7.000 360,000 75.000 000 27.000 80,000 100.000 70.000 40.000 WIND 000 $(170,000) "At this rate we'll be out of business within a year," said Cindy Zhang, the company's accountant. "But I've double checked these figures, so I now they're right." Solar Technology was organized at the bepinning of the current year to produce and market a revolutionary new solar battery. The company's accounting system was set up by Marge Wallace, and experienced accountant who recently left the company to do independent consulting work. The state cotaba t dax Zbobo A . "We may not last year if the insurance company doesn't pay the $226,000 it owes us for the 8,000 batteries lost in the warehouse fire last week," said Roger. The insurance adjuster says our claim is inflated, but he's just trying to pressure us into a lower figure. We have the data to back up our claim, and it will stand up in any court." On April 3, just after the end of the first quarter, the company's finished goods storage area was swept by fire and all 8.000 unsold batteries were destroyed. These batteries were part of the 40,000 units completed during the first quarter. The company's insurance policy states that the company will be reimbursed for the cost of any finished batteries destroyed or stolen. Zhang has determined this cost as follows: $28.25 per unit Total costs for the quarter, 31,130,000 Batteries produced during the quarter, 40,000 8,000 batteries X 528 25 = $226,000 The following additional information is available on the company's activities during the quarter ended March 31: Inventories at the beginning and end of the quarter were as follows Beginning of the Quarter End of the Quarter $10.000 50000 Work in process Finished goods hty percent of the mental cost for facilities and 90% of the utilities cost relate to manufacturing operations. The remaining amounts relate to selling and administrative activities. Required: 1. Prepare a cost of goods manufactured statement, cost of goods sold statement, and income statement for the first quarter. Please be sure to show adequate detail to support all calculations 2 What recommendations would you make to the President? 3. An EXECUTIVE SUMMARY
