Pwr GrwaPwt, a privately beld startup company, designs and manufacturers patente

Question

Pwr GrwaPwt, a privately beld startup company, designs and manufacturers patented electrodes for electric-powered vehicle batteries. GrwaPwr's patented electrodes allow battery makers to produce lighter and more powerful batteries for electric vehicles (cars, trucks, heavy equipment, etc,) because of GrwnPwr's unique electrode design and chemical composition. Each electrode consists of a pro- prietary metal alloy that is precisely machined in a four-axis computer numerical controlled (CNC) gang mill that can produce the extremely tight tolerances needed for lighter and more powerful batteries. Battery manufacturers then assemble from three to six electrodes to form a compiete battery unit You work as a financial analyst for a private equity firm that is considering making a direct investment in GrwnPwr. Your boss has asked you to analyze the firm's current financial condition. But before starting your analysis, your boss notices that GrwnPwr is using variable costing rather than traditional absorption costing. During GrwnPwr's first year of operations, it produced and sold two different electrodes, the X759 model and the Z200 model. GrwnPwr's variable costing income statement for its first year of operations is provided below. Note there were no beginning inventories of models X759 and Z200. X759 2200 Total Revenue Direct materials Direct labor Fixed manufacturing overhead Selling, general, adnin expenses Net income before taxes 537,600 $533,200 $1,070.800 (63,180) (59,140) (632.000) ($420,000) ($103,520) 31,360) (31,820) (32,480) (26,660) View as Page

Explanation / Answer

a.

Computation of hours of milling time:

GrwnPwr Absorption Costing Income Statement For the year ended...... X759 Z200 Total $ $ $ Revenues 537,600 533,200 1,070,800 Less: Cost of Goods Sold Direct Materials 47,040 45,510 Direct Labor 48,720 38,130 Fixed Manufacturing Overhead 318,062 313,938 Cost of Goods Manufactured 413,822 397,578 Less: Ending Inventory (137,941) (119,597) Cost of Goods Sold 275,881 277,981 553,862 Gross Profit 261,719 255,219 516,938 Less: Selling, General and Admin. Expenses (420,000) Net Income before Taxes 96,938

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