Solartronics, Inc.

In: Business and Management

Submitted By chivastroy12
Words 593
Pages 3
Solartronics, Inc.

Company Summary
Solartronics , Inc. is a small company that producing solar energy panels. It had established since mid-1977. At first, this company had some bad years but at the end of 1983 it had survived and was able to position itself as a reasonably good-sized firm within the industry.
Important Issue
In the autumn of 1983, the company was willing to “professionalize” itself by hiring new controller and financial manager, Mrs. Lisa Blocker, to replace a full-time, full charge bookkeeper. Mrs Blocker made a new, summarized income statement using monthly basis.
Company Problem
The new summarized income statement for January 1984 was confusing for the company’s president and general manager, Mr. John Holden.
SOLARTRONICS, INC. (B)
Summarized Income Statement
January 1984
Sales $165,000
Less: Cost of good sold (at standard) 108,900
Gross margin $ 56,100
Less: Selling expenses $26,500 General corporate overhead 18,000 Operating variances: Direct labor $(3,500) Direct material 500 Variable factory overhead (1,500) Fixed factory overhead—spending 2,000 Fixed factory overhead—volume (17,500) 20,000 64,500
Profit before tax $ (8,400)
Mr. Holden had not expected that the firm report a loss for the month of January. He wondered if the first month’s results were bad in terms of the budgeted results for the year. While he knew that sales had been down because of the normal seasonal downturn, and that production had been scaled back to help reduce the level of inventory, he was still surprised. He was concerned that such a poor start to the year might make it difficult to reach the sales that was budgeted 10% higher than previous year.

SOLARTRONICS, INC. (B)
Budgeted Income Statement
Calendar Year 1984
Sales $3,000,000
Less: Cost of…...

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