Ms Sally Scott obtained a patent on a small electronic device and organised to sell the product under Scott Products Inc. in order to produce and sell the device. During the first month of operations, the device was very well received by the market. Ms Scott anticipated healthy profit from sales of the product but was very surprised to see a loss for the month on her income statement. This statement was prepared by her accounting firm, which takes great pride in providing its clients with timely financial data. The statement follows: Scott

Prepare the income statement of Scott Product Inc. using the absorption costing

Was the CA(SA) correct in suggesting that the company really earned a profit for the month? Explain.

) How many units should Scott Product Inc. sell if Ms Scott would like to achieve a net profit after tax of R43 200? Assume a tax rate of 28% is applicable