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Technology Stocks : Disk Drive Sector Discussion Forum
WDC 264.40-8.9%11:27 AM EST
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To: T Bowl who wrote (1801)12/15/1997 12:41:00 PM
From: JimieA  Read Replies (1) of 9256
 
Here are my basic accounting answers:

For the First Quarter, The company would report

Sales of $10M
and
Cost of Sales of $5.83M
5M units sold X ($1M fixed costs + $6M variable costs)/6M units produced
for a Gross Profit of $4.17M or 41.67%

Also Inventory of $1.17M
1M X ($1M fc + $6M vc)/6M
Inventory can be defined as costs which are deferred from the current period to a future period.

If in the second quarter they sold these 1 million units for the same $2 each. The second quarter would have

Sales of $2M
and
Cost of Sales of $1.17M
1M X ($1M + $6M)/6M
for a Gross Profit of $.83M or 41.67%

As you can see from the above, the company defers to a future period both variable and fixed costs.
This is of course a theoretical exercise only.

I hope this helps.
A former weenie of finance
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