Need assistance with the attached exercise. Tks! 
Stacy Lynn, Inc. (SLI) is a manufacturer of rice cookers. The rice cookers sell for $45 per unit; the sales were 3,600 units in the current year, 2009. SLI has 400 units available for sale at the end of 2009 and is projecting sales of 4,400 units in 2010. SLI is planning the same production level for 2010 as in 2009, 4,000 units. The variable manufacturing costs for SLI are $16 and the variable selling costs are only $.50 per unit. The fixed manufacturing costs are $100,000 per year and the fixed selling costs are only $500 per year. Assume that beginning inventory was 0 for 2009. Stacy Ann Lynn, the great granddaughter of the company's founder is the current CEO/President of the company, which is still a family owned business. The previous several years have been especially difficult due to pricepressure from Chinese imports. At the moment, all that Stacy believes she can do is to try to keep the company running until the economy improves. But, the company needs an immediate infusion of cash. So, she has decided to ask her bank for a large line of credit to maintain operating viability for the foreseeable future. Additional Financial Information for SLI, 2009 and 2010: Based on the information provided in the narrative and the financial statement above, please post a substantive response to the following parts of this Unit 6 Discussion: A. If Patty wants to show the bank the maximum profit over the previous 2-year period, which costing method should she present? B. But, the bank requires that all financial statements conform to Generally Accepted Accounting Principles (GAAP). Based on that requirement, which costing method should she present? C. The bank has delivered a memo in preparation for the meeting to negotiate the Credit Line; the memo states that they will expect a significant Net Income. Based on your responses to parts A and B, what are the legal and ethical issues facing Stacy Lynn? A - If Patty wants to show the bank the maximum profit over the previous 2-year period, which costing method should she present? B - But, the bank requires that all financial statements conform to Generally Accepted Accounting Principles (GAAP). Based on that requirement, which costing method should she present? C - The bank has delivered a memo in preparation for the meeting to negotiate the Credit Line; the memo states that they will expect a significant Net Income. Based on your responses to parts A and B, what are the legal and ethical issues facing Stacy Lynn? Solutions: a) If Patty wants to show maximum profit to the bank for the two years, then she should prefer marginal costing because it ignores manufacturing overhead. Why marginal costing under marginal costing net income will show more than absorption costing, marginal costing wont considered the manufacturing cost So Patty wants to show the bank the maximum profit over the previous 2-year period need to considered marginal costing method of costing b) GAAP requires absorption costing to be used for financial statements because this costing system shows manufacturing overhead as assets in one way or the other are used up and shows the true value of financial statements. c) A line of credit is in different forms, such as demand loan, overdraft protection, special purpose, term loan, export packing credit, discounting purchase of commercial bills etc. it is one of effective source of funds that can readily be tapped at the discretion of the borrowers. Interest is paid only on actually withdrawn money. The borrower is required to pay an unused line fee, an annualized fee on the money not withdrawn. Lines of credit can be secured by collateral, or may be unsecured. Lines of credit can be extended by financial institutions, banks and other licensed consumer lenders to creditworthy customers (though some special purpose lines of credit may not have creditworthiness requirements) to address the liquidity problems, such line of credit is also called personal line of credit. It is also referred to the credit limit of a customer, it means, the maximum amount of credit a customer is allowed. A - If Patty wants to show the bank the maximum profit over the previous 2-year period, which costing method should she present? B - But, the bank requires that all financial statements conform to Generally Accepted Accounting Principles (GAAP). Based on that requirement, which costing method should she present? C - The bank has delivered a memo in preparation for the meeting to negotiate the Credit Line; the memo states that they will expect a significant Net Income. Based on your responses to parts A and B, what are the legal and ethical issues facing Stacy Lynn? Solutions: a) If Patty wants to show maximum profit to the bank for the two years, then she should prefer marginal costing because it ignores manufacturing overhead. Why marginal costing under marginal costing net income will show more than absorption costing, marginal costing wont considered the manufacturing cost So Patty wants to show the bank the maximum profit over the previous 2-year period need to considered marginal costing method of costing b) GAAP requires absorption costing to be used for financial statements because this costing system shows manufacturing overhead as assets in one way or the other are used up and shows the true value of financial statements. c) A line of credit is in different forms, such as demand loan, overdraft protection, special purpose, term loan, export packing credit, discounting purchase of commercial bills etc. it is one of effective source of funds that can readily be tapped at the discretion of the borrowers. Interest is paid only on actually withdrawn money. The borrower is required to pay an unused line fee, an annualized fee on the money not withdrawn. Lines of credit can be secured by collateral, or may be unsecured. Lines of credit can be extended by financial institutions, banks and other licensed consumer lenders to creditworthy customers (though some special purpose lines of credit may not have creditworthiness requirements) to address the liquidity problems, such line of credit is also called personal line of credit. It is also referred to the credit limit of a customer, it means, the maximum amount of credit a customer is allowed
