Home Programs Faculty Research Curriculum Center Public Resources My Account
Member Sign In
Shopping Cart  
My Account
My E-Packets
Browse Bibliography:
By Keywords:

By Type:
New/Updated Items
Popular Items
Background Notes
Primers and Books

By Functional Area:
Finance/Financial Management
Financial Accounting
Financial Analysis and Management
General Management
Management Accounting
Management Control Systems
Operations Management
Organizational Behavior

By Setting:
Developing Country
For Profit
Health Policy
Healthcare Management
Nonprofit Organization Management
Public Sector Management

Curriculum Center Browse Bibliography Build EPacket Pricing Structure Distribution Process Management Control in Nonprofit Organizations
Narcolarm, Inc. (C)
Young, David W.
Functional Area(s):
   Financial Accounting
   Management Accounting
   For Profit
Difficulty Level: Beginner
Pages: 2
Teaching Note: Available. 
Copyright Clearance Fee:  $9.00  Sign in to find out if you are eligible for an Academic Price of $5.00 
Add Item to a new E-Packet

Add To Cart

Order an Free Inspection Copy

Back to Bibliography
First Page and the Assignment Questions:

Mary Lou Black, M.D., president of Narcolarm, Inc., was in the process of preparing a business plan, including some pro forma (i.e. projected) financial statements, for her new venture [see Narcolarm, Inc. (A) and Narcolarm, Inc. (B)].

Enlisting the help of a niece who had recently completed a course in accounting, Dr. Black first prepared a list of requirements and activities necessary to launch the new enterprise, which she called “Narcolarm, Inc.” These requirements and activities led to the development of an initial balance sheet, shown in Exhibit 1.

Next, again with the help of her niece, Dr. Black projected the activities that would take place during the first year of operations. These are shown in Exhibit 2. She realized that these were overall estimates, and that they would not necessarily occur in the sequence shown, but she felt they were sufficient to allow her to prepare a set of pro forma financial statements for the first year of operations.

Unlike her previous plan, she now planned to store completed Narcolarms in inventory, so that she would always have sufficient devices on hand to meet demand. As a result, she would need to have three inventories: raw-materials, work-in-process, and finished-goods.


  1. Beginning with the balance sheet shown in Exhibit 1, and using up T Accounts, indicate the effect of each of the activities listed in Exhibit 2. Those items that differ from the Narcolarm (B) case are shown in boldfaced type. (You do not need to have analyzed the Narcolarm (B) case to analyze this case.)
  2. Prepare a pro forma balance sheet as of the end of that year.
  3. Prepare two pro forma income statements: one based on the information in the (B) case (i.e. without WIP and finished goods inventories) and one based on the information in Exhibit 2 of this case. Why do these two income statements differ? (If you already have analyzed the (B) case, your notes should contain the income statement for operations without a WIP inventory.)
  4. Would your opinion of Dr. Black's proposed venture change if she were producing to inventory rather than to order? Why or why not?