Disk Drive Sector Discussion Forum Message Board

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Technology Stocks : Disk Drive Sector Discussion Forum

WDC 287.20

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3:23 PM EST

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To: Frodo Baxter who wrote (1792)	12/15/1997 9:37:00 AM
From: T Bowl	Read Replies (3) of 9256

Hey you financial weenies... Please explain how this works. A company produces 6mil DDs and only sells 5mil of them. 1 mil left in inventory. When they report the Q financials where do all of the numbers fall? Here's my example. It costs them $1mil(fixed costs) to run the place and $1(var cost) for every DD produced. Therefore it cost them $1mil + $16mil = $7mil to produce all of the DDs. They sell the DDs for $2 each therefore have 5mil$2 = $10mil in rev for the Q. In the financial summary what do they report? Quarter 1 Rev = $10mil Cost of goods = (What?) $1mil + $16mil = $7mil? Or $1mil + $15mil = $6mil? Or other? Inventory (finished goods) = $2mil Is the Gross Profit $2mil or $3mil? In the next Q let's say that the totally shut everything down and just sell the inventory. Do some of the deferred costs end up in this Q? They really haven't spent any $ this Q to produce them. Do they end up with 100% GM? Or are the variable costs of $1mil take this down? My real question is, will an increase in inventory for a Q hurt or help a company in the following Q? Will the GMs artificially be propped up or not? Sorry for the basic questions todd

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