A company in the business of producing large special-purpose computers has in- troduced a new model...

 

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A company in the business of producing large special-purpose computers has in- troduced a new model of an existing product. The new machine represents a significant technological advancement, and substantial learning curve costs are expected. Based on extensive studies, the company has determined that it is reasonable to forecast a market of at least 200 units for the new computer. Accordingly, the company has calculated its estimated average cost of sales per machine of $100,000, as follows: Initial tooling and other production costs..... Estimated production costs (200 units X $90,000). Total estimated production costs..... ... Number of units to be produced and sold..... Average cost per unit ($10,000 initial costs + $90,000 production costs)...... $ 2,000,000 18,000,000 $20,000,000 200 $100,000 At the balance sheet date, the company has received firm orders for 150 computers. As of this same date, the company has delivered and installed 45 computers; 35 additional units are in production and are estimated to represent 15 equivalent completed units. Total costs incurred at the balance sheet date, including initial tooling and other production costs amounted to $9,350,000. Required: The amount to be reported as production "learning curve" and other program costs deferred. A company in the business of producing large special-purpose computers has in- troduced a new model of an existing product. The new machine represents a significant technological advancement, and substantial learning curve costs are expected. Based on extensive studies, the company has determined that it is reasonable to forecast a market of at least 200 units for the new computer. Accordingly, the company has calculated its estimated average cost of sales per machine of $100,000, as follows: Initial tooling and other production costs..... Estimated production costs (200 units X $90,000). Total estimated production costs..... ... Number of units to be produced and sold..... Average cost per unit ($10,000 initial costs + $90,000 production costs)...... $ 2,000,000 18,000,000 $20,000,000 200 $100,000 At the balance sheet date, the company has received firm orders for 150 computers. As of this same date, the company has delivered and installed 45 computers; 35 additional units are in production and are estimated to represent 15 equivalent completed units. Total costs incurred at the balance sheet date, including initial tooling and other production costs amounted to $9,350,000. Required: The amount to be reported as production "learning curve" and other program costs deferred.

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