Greenville, Inc

The December 31, 2007, balance sheet of Greenville, Inc. is presented below:

Greenville, Inc.

Balance sheet

December 31, 2007

Cash $ 5,000 Accounts Payable* $ 5,000

Accounts Receivable 2,000 Bonds Payable 20,000

Raw Materials (500 x $8) 4,000 Total Liabilities 25,000

Finished Goods (1,000 x $14) 14,000 Common Stock 5,000

Fixed Assets 25,000 Retained Earnings 15,000

Accumulated Depreciation (5,000) Total SE 20,000

Total Assets $ 45,000 Total Liabilities & SE $ 45,000

*($4,000 from raw materials purchases and $1,000 from electricity)

Other Information:

Greenville anticipates sales of products to occur as follows:

Units

2008 1st Half 1,200

2008 2nd Half 1,400

2009 1st Half 1,800

2009 2nd Half 1,200

One-half of sales are cash sales. The other one-half are credit sales, which are collected in the following period. All items are sold for $24 each.

Production costs per unit are as follows:

Raw Materials $ 8.00

Direct Labor 2.00

Variable Overhead 1.00

Fixed Overhead ($4,000/2,500) 1.60

Total Unit Cost $ 12.60

 Variable overhead represents electricity. Electricity costs are paid in the period following their use.

 Fixed overhead represents deprecation of fixed assets. All depreciation is a factory cost. Greenville’s fixed assets have a remaining life of 5 years.

Greenville has adopted the policy for finished goods that at the end of any period, one-half of the next period’s needs should be on hand. There are 1,000 units of inventory on hand January 1, 2008.

Each unit of finished goods requires one unit of raw materials, which cost $8 per unit. Greenville had adopted the policy that at the end of any period, all of the raw materials needed for the next period should be on hand. There are 500 units of raw materials on hand January 1, 2008. Raw materials are purchased on...