Metlock Inc. sells appliances

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

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

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

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

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
Cashreceived $          8,800 $ 13,200 $ 17,600

$ 39,600

Answer:

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

 
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