S&S Air was founded 10 years ago by friends Mark Sexton and Todd Story. The company has
manufactured and sold light airplanes over this period, and the company’s products have received high reviews
for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and
fly their own airplanes. The company has two models, the birdie, which sells for US$53, 000, and the Eagle,
which sells for US$78, 000. While the company manufactures aircraft, its operations are different from
commercial aircraft companies. S&S Air builds aircraft to order. By using prefabricated parts, the company is
able to complete the manufacture of an airplane in only five weeks.
The company also receives a deposit on each order, as well as another partial payment before the order is
complete. In contrast, a commercial airplane may take one and one-half to two years to manufacture once the
order is placed. Mark and Todd have provided the following financial statements. They have also gathered the
industry ratios for the light airplane manufacturing industry.