Winnebago Industries, Inc. is a leading manufacturer ofrecreational vehicles (RVs), including motorized and towableproducts. The company designs, develops, manufactures, and marketsRVs as well as supporting products and services. The RVs are soldto consumers through a dealer network. On the August 29, 2015,balance sheet, Winnebago reported inventory of approximately $112million. Of this amount, approximately $12 million, about 11%, wasFinished Goods Inventory (Notes to Consolidated FinancialStatements, Note 3). Suppose Winnebago motor homes have an averagesales price of $96,000 and cost of goods sold is 89% of sales. ThorIndustries, Inc., a major competitor, has an average cost of goodssold of 86% of sales. For year ending August 29, 2015, Winnebagosold 9,097 motor homes (Form 10-K, Item 1 Business).
Requirements

1. Why would the Finished Goods Inventory be such a relativelysmall portion of total inventory?

2. What is the average cost of goods sold (in dollars) for aWinnebago motor home? What is the average gross profit?

3. If Winnebago could reduce production costs so that theaverage cost of goods sold is equal to their competitor’s averagecost of goods sold, how much more profit would Winnebago earn oneach motor home sold?

4. Based on 2015 sales, how much would operating income increaseif the company reduced the average cost of goods sold to equaltheir competitor’s average cost of goods sold?

5. How could managers at Winnebago use managerial accounting toreduce costs and increase profits?