Direct materials and direct labor for products sold

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Reference no: EM131262411

Sail New England prduces small sailboats for beginning sailors and for small boat regattas. Sales in the most recent year were $5,000,000 with profits before taxes of $600,000. Annual S,G,& A expenses are approximaely $1000,000, direct materials and direct labor for products sold were $1,900,000 and $600,000, respctively. Sail New England has a loan outstanding of $700,000 with its current bank, and has come to your bank to see if you will offer better terms to replace the existing loan. The CFO has forwarded you their annual report in preparation for a meeting to discuss the loan. While reviewing their annual report, you find the following footnote: Note 1: Under-absorbed overhead of $600,000 was prorated to inventories (75%) and cost of goods sold (25%). A. How does tthis footnote affect your evaluation of Sail New England and its credit-worthiness? B. What questions do you want to ask the president and CFO regarding the footnot

Reference no: EM131262411

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