Write a letter to the CEO at High-End Lifts. Recommend for-or-against the transition to manufacturing the elevators. Justify your recommendations with the results you derived in the financial statements. In the letter, address the concerns of the VP of Manufacturing regarding the application of overhead and address how the failure to assign overhead to the units of production violates GAAP (GAAP requires that overhead be capitalized and assigned to the units of production).

Manufacturing Outsourcing $ 6,875,000 Sales Revenue 6,875,000 100.00% 100.00% $ $ Cost of Goods Sold 4,812,500 70.00% 3,437,500 50.00% $ $ Gross Profit 2,062,500 30.00% 3,437,500 50.00% SG&A Expense: Advertising Expense 687,500 10.00% 687,500 10.00% Sales Commission 343,750 5.00% 343,750 5.00% Salaries and wages expense 481,250 7.00% 481,250 7.00% $ Depreciation Expense 23,900 0.35% 23,900 0.35% Insurance Expense $ 25,000 0.36% 25,000 0.36% $ $ Rent Expense 24,000 0.35% 24,000 0.35% Utilities Expense 14,500 0.21% 14,500 0.21% Total SG&A Expense $ 23.27% 1,599,900 1,599,900 23.27% 1,837,600 26.73% Operating Income (EBIT) 462,600 6.73% A + ( A + A A A A Manufacturing Outsourcing $ 6,875,000 Sales Revenue 6,875,000 100.00% 100.00% $ $ Cost of Goods Sold 4,812,500 70.00% 3,437,500 50.00% $ $ Gross Profit 2,062,500 30.00% 3,437,500 50.00% SG&A Expense: Advertising Expense 687,500 10.00% 687,500 10.00% Sales Commission 343,750 5.00% 343,750 5.00% Salaries and wages expense 481,250 7.00% 481,250 7.00% $ Depreciation Expense 23,900 0.35% 23,900 0.35% Insurance Expense $ 25,000 0.36% 25,000 0.36% $ $ Rent Expense 24,000 0.35% 24,000 0.35% Utilities Expense 14,500 0.21% 14,500 0.21% Total SG&A Expense $ 23.27% 1,599,900 1,599,900 23.27% 1,837,600 26.73% Operating Income (EBIT) 462,600 6.73% A + ( A + A A A A