Crystal Glass is a producer of heirloom-quality glassware. The company has a solid reputation and is widely

Question:

Crystal Glass is a producer of heirloom-quality glassware. The company has a solid reputation and is widely regarded as a model corporate citizen. You have recently been hired as a staff accountant at a time when the company is experiencing rapid growth and is looking for a substantial increase in the at the local bank. They also are planning on trying to take the company public in the next three to five years. At the present time the company is a closely held family-owned business. One of your first jobs is to review the current month’s income statement for accuracy. The income statement appears as follows:
Crystal Glass, Inc.
Statement of Income
For the year ended October 31, 2009
Sales revenue .......... $12,008,450
Variable costs .......... 8,475,361
......... 3,533,089
Fixed costs ........... 1,845,902
Net income ........... $ 1,687,187
You are given the following additional information:
Variable costs:
Manufacturing .......... $ 6,356,521
S&A .............. $2,118,840
Fixed costs:
Manufacturing ........... $1,476,722
S&A ............... $369,180
Beginning inventory ......... 250,000 units
Production 2009 ........... 500,000 units
Sales 2009 ............. 600,000 units

Required
A. What type of costing method is used by Crystal Glass?
B. Does the method comply with GAAP? If not, what costing method should be used?
What would net income be?
C. Could the statements be misleading to the bank? Why or why not?
D. What are your options as the new staff accountant? Who are the impacted?

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes... Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,... Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...