# Savannah, Inc. is a company that manufactures and sells a single product. Unit sales for each of the four quarters of 2012 are projected as follows. Quarter Units First ........ 80,000 Second ....... 150,000 Third ....... 550,000 Fourth ........ 120,000

Savannah, Inc. is a company that manufactures and sells a single product. Unit sales for each of the four quarters of 2012 are projected as follows.

Quarter Units

First ........ 80,000

Second ....... 150,000

Third ....... 550,000

Fourth ........ 120,000

Annual Total .... 900,000

Savannah incurs variable manufacturing costs of $0.40 per unit and variable nonmanufacturing costs of $0.35 per unit. Savannah will incur fixed manufacturing costs of $720,000 and fixed nonmanufacturing costs of $1,080,000. Savannah will sell its product for $4.00 per unit.

Accounting

Determine the amount of net income Savannah will report in each of the four quarters of 2012, assuming actual sales are as projected and employing the integral approach to interim financial reporting. (Ignore income taxes.)

Analysis

Compute Savannah’s profit margin on sales for each of the four quarters of 2012. What effect does employing the integral approach instead of the discrete approach have on the degree to which Savannah’s profit margin on sales varies from quarter to quarter?

Principles

Explain the conceptual rationale behind the integral approach to interim financial reporting.

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## Accounting Integral Approach 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Sales 320000 600000 2200000 480000 Less Variable manufacturing costs 3200…View the full answer

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