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After Company Y's operating profit report and summary of manufacturing activity for the year has been prepared, you, the chief accountant, learn that $1,000,000 of raw materials were thrown away during the year because the items had spoiled and couldn't be used in the manufacturing process. The company's president knows about this loss and insists that no change be made in the operating profit report and summary of manufacturing activity. Do you go along with the president, or do you argue for changing the operating profit report and summary of manufacturing activity?
Company Y
Company Z
Operating Profit Report for Year
Per Unit
Totals
Sales volume, in Units
500,000
2,000,000
Sales Revenue
$85.00
$42,500,000
$25.00
$50,000,000
Cost of Goods Sold Expense (see below)
-56
-28,000,000
-18.45
-36,900,000
Gross Margin
$29.00
$14,500,000
$6.55
$13,100,000
Variable Operating Expenses
-12.5
-6,250,000
-2.5
-5,000,000
Contribution Margin
$16.50
$8,250,000
$4.05
$8,100,000
Fixed Operating Expenses
-7,500,000
Operating Profit
$3,250,000
$600,000
Manufacturing Activity Summary for Year
Annual Production Capacity, in Units
800,000
2,500,000
Actual Output, in Units
Raw Materials
$15.00
$7,500,000
$7.50
$18,750,000
Direct Labor
20
10,000,000
2.75
6,875,000
Variable Manufacturing Overhead Costs
5
12,500,000
Total Variable Manufacturing Costs
$40.00
$20,000,000
$15.25
$38,125,000
Fixed Manufacturing Overhead Costs
16
8,000,000
3.2
Product Cost and Total Manufacturing Costs
$56.00
$28,000,000
$18.45
$46,125,000
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ace is a cma working in a new assignment as an assistant to sally the head manager of a production department. ace
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