During year 1, Benson Manufacturing Company incurred $51,600,000 of research and development (R&D) costs to create...

Answer:

Requirement A:

Meaning of Upstream cost :- The cost which is incurred before manufacturing process starts, that is called upstream cost.

Meaning of Downstream cost:- The cost which is incurred after manufacturing process completed is called downstream cost.

1.	Research and Development	Upstream cost
2.	Packing	Downstream cost
3.	Shipping	Downstream cost
4.	Sales Commission	Downstream cost

Requirement B:

Cost of Goods Sold (working note)	$17,160,000
Ending Inventory (working note)	$1,760,000

Working note:

Calculation of Cost of Goods Sold = Batteries sold × Manufacturing cost

= 390,000 × $44 = $17,160,000

Calculation of Ending Inventory:

= (Batteries made - Batteries sold)× manufacturing cost

= (430,000 - 390,000) × $44

= $1,760,000

Requirement C:

Sales price (working note)

$122.5

Working note:

Calculation of Sales Price :- While calculating sales price, first of all we have to calculate cost per unit.

Cost per unit :

= Manufacturing cost + Packing, Shipping, Commission cost + Research and Development cost

= $44 + $11 + 43( working)

= $98

Working:

Research and development cost = Cost incurred/ Batteries expected to sell

= $51,600,000 / 1,200,000

= $43 per unit

Sales price = Cost price + 25% of cost price

= $98 + ($98 × 25%)

= $122.5

Requirement D:

ROONEY MANUFACTURING COMPANY

Income Statement

	$
Sales ( 390,000 × $122.5)	47,775,000
Cost of goods sold (calculated in requirement b)	17,160,000
Gross margin	30,615,000
Research and development (given)	51,600,000
Selling expenses (390,000 × $11)	4,290,000
Net income (loss)	(25,275,000)

There is a net loss of $25,275,000

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Have a great day Champ!