James Alvarez, an engineer, needs some accounting advice. In their spare time during the past year, Alvarez

Question:

James Alvarez, an engineer, needs some accounting advice. In their spare time during the past year, Alvarez and his college-aged son, Robert, have manufactured a small weed-trimming sickle in a rented building near their home. Robert, who has had one accounting course in college, keeps the books. Alvarez is pleased about the results of their first year's operations. He asks you to look over the following income report prepared by Robert before they leave on a well-deserved vacation to Hawaii, after which they plan to expand their business significantly.

image text in transcribed

After you examine the income report, Alvarez responds to your questions and assures you that (1) no theft or spoilage of materials has occurred, (2) no partially completed units are involved, and (3) he and son Robert have averaged 30 hours each per week in the business for 50 weeks (ignore income taxes). Required

a. Identify any apparent discrepancy in the income report in the cost of materials used.

b. Recalculate the cost of goods manufactured, the average cost per unit produced, and the net income for the year. 

c. What factors should James consider regarding the profitability of his venture before deciding to expand it significantly?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Managerial Accounting For Undergraduates

ISBN: 9780357499948

2nd Edition

Authors: James Wallace, Scott Hobson, Theodore Christensen

Question Posted: