Upstream, midstream, and downstream costs

Power-To-Spare, Inc. makes a smartphone case that includes a battery that extends the operating life of an iPhone. The manufacturing costs per unit include $15 direct materials, $17 direct labor, and $8 manufacturing overhead. These costs are based on a production and sales volume of 4,000 units. Advertising costs amounted to $25,000. Research and development cost for the materials used in thePage 399 phone cases amounted $30,000. Companywide administrative costs amounted to $45,000. Fashion design costs amounted to $20,000. Power-To-Spares management team established the sales price at 150 percent of GAAP-defined product cost.

Required

Determine the total amount of upstream costs.

Determine the total amount of downstream cost.

Determine the total amount of midstream cost.

Determine the sales price per unit.

Prepare a GAAP-based income statement.

Provide a plausible explanation as to why the company incurred the loss shown on the income statement prepared to satisfy Requirement e. (Hint: Calculate the full cost of making and selling the cases.)

LO 10-4

CHECK FIGURES

a. Net income: $23,000

b. Total assets: $145,000

c. Net income: $54,500