4. Paid $900 rental fee for production equipment. 5. Paid $350 to administrative

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4. Paid $900 rental fee for production equipment. 5. Paid $350 to administrative employees. 6. Paid $400 rental fee for administrative office equipment. 7. Produced 400 units of inventory of which 360 units were sold at a price of $25 each. Required Prepare an income statement and a balance sheet in accordance with GAAP Problem 10-25 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. Ad- vertising costs amounted to $25,000. Research and development cost for the materials used in the

Explanation / Answer

Direct Materials $15 Direct Labor $17 Manufacturing overhead $8 Production and sales volume 4000 Advertising costs $25,000 Research and development costs $30,000 Administrative costs $45,000 Fashion Design costs $20,000 Sales Price 150 percent of GAAP Defined Product Costs Upstream costs are costs that occur before the production process begins Research and devlopments Costs $30,000 Fashion Design costs $20,000 Tota Upstream costs $50,000 Midstream costs are the costs which are incurred for making products Direct Materials $15 Direct Labor $17 Manufacturing overhead $8 $40 Production Volume 4000 Midstream costs $160,000 Downstream costs are the costs that are incurred after the manufacturing process is cmpleted Advertising costs $25,000 Administrative costs $45,000 Total costs $70,000 GAAP defines the midstream costs as the defined product costs Total Midstream costs $160,000 $40 Sales price @ 150% $240,000 $60 POWER TO SPARE, INC INCOME STATEMENT Sales Revenue $240,000 Less : Cost of Goods Sold $160,000 Gross Margin $80,000 General selling & administrative costs Downstream costs $70,000 Upstream costs $50,000 $120,000 Net Loss ($40,000) The company incurred loss because the sales price was develop by considering only the production costs, other costs were ignored

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