Glitter Inc. is a fashion designer company that serves both individuals and companies (mostly in the entertainment industry). Glitter recorded the following information for last month's transactions:
Projects in Process at the beginning of the month: 20 projects, 15% complete, with $30,000 of fixed overhead costs allocated.
Projects in Process at the end of the month: 40 projects, 50% complete
All projects in process at the beginning of the month are considered completed by the end of the month, and costs are tracked for each project individually. This month, fixed overhead was allocated at a rate of $6,000/project (applied evenly over the production process).
Management is concerned about their costs, and wants to get a short-term bank loan-just enough to cover their variable operating loss from this past month while projects are completed. The bank requires Glitter to submit GAAP-compliant financial statements and will only grant a loan if they can show absorption operating income at least $15,000 greater than the loan requested.
Will Glitter be able to receive the loan needed?

Question

Glitter Inc. is a fashion designer company that serves both individuals and companies (mostly in the entertainment industry). Glitter recorded the following information for last month's transactions:
  Projects in Process at the beginning of the month: 20 projects, 15% complete, with $30,000 of fixed overhead costs allocated.
Projects in Process at the end of the month: 40 projects, 50% complete
All projects in process at the beginning of the month are considered completed by the end of the month, and costs are tracked for each project individually. This month, fixed overhead was allocated at a rate of $6,000/project (applied evenly over the production process).
Management is concerned about their costs, and wants to get a short-term bank loan-just enough to cover their variable operating loss from this past month while projects are completed. The bank requires Glitter to submit GAAP-compliant financial statements and will only grant a loan if they can show absorption operating income at least $15,000 greater than the loan requested.
Will Glitter be able to receive the loan needed?

Quizplus · Accepted Answer

The Answer of Glitter Inc. is a fashion designer company that serves both individuals and companies (mostly in the entertainment industry). Glitter recorded the following information for last month's transactions:
  Projects in Process at the beginning of the month: 20 projects, 15% complete, with $30,000 of fixed overhead costs allocated.
Projects in Process at the end of the month: 40 projects, 50% complete
All projects in process at the beginning of the month are considered completed by the end of the month, and costs are tracked for each project individually. This month, fixed overhead was allocated at a rate of $6,000/project (applied evenly over the production process).
Management is concerned about their costs, and wants to get a short-term bank loan-just enough to cover their variable operating loss from this past month while projects are completed. The bank requires Glitter to submit GAAP-compliant financial statements and will only grant a loan if they can show absorption operating income at least $15,000 greater than the loan requested.
Will Glitter be able to receive the loan needed?