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In: Accounting

Metlock Inc. sells appliances to Seasons Department Store. A recent order requires Metlock to manufacture and...

Metlock Inc. sells appliances to Seasons Department Store. A recent order requires Metlock to manufacture and deliver 500 toasters at a price of $88 per unit. Metlock’s manufacturing costs are approximately $44 per unit. The following schedule summarizes the production and delivery record of Hydra:

A) Assuming that Metlock recognizes revenue when the toasters are produced, how much revenue should be recognized in each of the three years?

B) Assuming that Metlock recognizes revenue at delivery, how much revenue should be recognized in each of the three years?

C) Calculate net income for the three periods under each of the two preceding assumptions. (Assumption A and B, for all 3 years)

Year 1 2 3 Total
Toasters produced $             200 $       200 $       100 $       500
Costs incurred $          8,800 $    8,800 $    4,400 $ 22,000
Toasters delivered $             150 $       200 $       150 $       500
Cash received $          8,800 $ 13,200 $ 17,600

$ 39,600

Solutions

Expert Solution

Particulars year 1 year 2 year 3
Toasters produced 200 200 100
Selling Price 88 88 88
Revenue under A $17,600.00 $17,600.00 $8,800.00
Cost $8,800.00 $8,800.00 $4,400.00
Net Income $8,800.00 $8,800.00

$4,400
Particulars year 1 year 2 year 3
Toasters produced 200 200 100
Selling Price 88 88 88
Toasters Delivered 150 200 150
Revenue under B $13,200.00 $17,600.00 $13,200.00
Closing Stock 50 50 0
Opening Stock 0 50 50
Closing Stock value ($44) 2200 2200 0
Opening Stock value (44) 0 2200 2200
Gross profit $15,400.00 $17,600.00 $11,000.00
Cost $8,800.00 $8,800.00 $4,400.00
Net Income $6,600.00 $8,800.00 $6,600.00

A)

Year 1 Year 2 Year 3

Revenue under A $17,600.00 $17,600.00 $8,800.00

B)   Year 1 Year 2 Year 3

Revenue under B $13,200.00 $17,600.00 $13,200.00

c)   (A) Year 1 Year 2 Year 3

Net Income $8,800.00 $8,800.00

$4,400

(B) Year 1 Year 2 Year 3

Net Income $6,600.00 $8,800.00 $6,600.00

ekkarill92 answered 2 years ago
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