Exercise 101OA (Algo) Identifying upstream and downstream costs LO 10-4 During Year 2, Fanning Manufacturing Company incurred $73,100,000 of research and development (R&D} costs to create a long-life battery to use in computers. In accordance with FASB standards, the entire R&D cost was recognized as an expense in Year 2. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $72 per unit. Packaging, shipping, and sales commissions are expected to be $10 per unit. Fanning expects to sell 1.700.000 batteries before new research renders the battery design technologically obsolete. During Year 2, Fanning made 449,000 batteries and sold 398,000 of them. Required a. Identify the upstream and downstream costs. b. Determine the Year 2 amount of cost of goods sold and the ending inventory balance that would appear on the nancial statements that are prepared in accordance with GAAP. c. Determine the sales price assuming that Fanning desires to earn a profit margin that is equal to 30 percent of the total cost of developing, making, and distributing the batteries. d. Prepare a GAAPbased income statement for Year 2. Use the sales price developed in Requirement C. Complete thls question by entering your answers In the tabs below. Required A Required B Required C Required D Identify the upstream and downstream costs. Research and development IM _ Required B ) Exercise 10-1OA (Algo) Identifying upstream and downstream costs LO 10-4 During Year 2, Fanning Manufacturing Company incurred $73,100,000 of research and development (R&D) costs to create a long-life battery to use in computers. In accordance with FASB standards, the entire R&D cost was recognized as an expense in Year 2. Manufacturing costs (direct materials, direct labor. and overhead) are expected to be $72 per unit. Packaging, shipping, and sales commissions are expected to be $10 per unit. Fanning expects to sell 1,700,000 batteries before new research renders the battery design technologically obsolete. During Year 2, Fanning made 449,000 batteries and sold 398,000 ofthem. Req u ired a. Identify the upstream and downstream costs. b. Determine the Year 2 amount of cost of goods sold and the ending inventory balance that would appear on the financial statements that are prepared in accordance with GAAP. c. Determine the sales price assuming that Fanning desires to earn a profit margin that is equal to 30 percent of the total cost of developing, making, and distributing the batteries. d. Prepare a GAAPbased income statement for Year 2. Use the sales price developed in Requirement 6. Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Determine the Year 2 amount of cost of goods sold and the ending inventory balance that would appear on the nancial statements that are prepared in accordance with GAAP. Cost ofgoods sold Exercise 10-1OA (Algo) Identifying upstream and downstream costs LO 10-4 During Year 2, Fanning Manufacturing Company incurred $73,100,000 of research and development (R80) costs to create a long-life battery to use in computers. In accordance with FASB standards, the entire R&D cost was recognized as an expense in Year 2. Manufacturing costs (direct materials, direct labor, and overhead) are expected to be $72 per unit. Packaging, shipping, and sales commissions are expected to be $10 per unit. Fanning expects to sell 1,700,000 batteries before new research renders the battery design technologically obsolete. During Year 2, Fanning made 449,000 batteries and sold 398,000 of them. Req u ired a. Identify the upstream and downstream costs. b. Determine the Year 2 amount of cost of goods sold and the ending inventory balance that would appear on the nancial statements that are prepared in accordance with GAAP. c. Determine the sales price assuming that Fanning desires to earn a prot margin that is equal to 30 percent of the total cost of developing, making, and distributing the batteries. d. Prepare a GAAPbased income statement for Year 2. Use the sales price developed in Requirement c. Complete this question by enterlng your answers In the tabs below. Required A Required B Required C Required D Prepare a GAAP-based income statement for Year 2. Use the sales price developed in Requirement c. (Do not round intermediate calculations.) Net income (loss)