Asked by Botle Jacqueline on Apr 30, 2024
Verified
Refer to Exhibit 18-3.What net income (loss) should be recognized by Dunedin in 2010?
A) $2, 590 loss
B) $1, 160 income
C) $1, 210 income
D) $2, 640 loss
Direct Cost
Costs that can be directly attributed to the production of specific goods or services, such as materials and labor.
Initial Direct Costs
Expenses directly associated with acquiring or originating a new loan or insurance policy, capitalized and amortized over the life of the loan or policy.
Net Income
A measure of the profitability of a company after all expenses and taxes have been subtracted from total revenue.
- Learn about different strategies for revenue recognition and their application.
- Familiarize oneself with the cost implications of durable contracts and the process of their recognition.
Verified Answer
SH
Sherry HightowerMay 01, 2024
Final Answer :
B
Explanation :
The net income recognized by Dunedin in 2010 can be calculated as follows: - Revenue from contracts: 100 contracts * $500 = $50,000- Initial direct costs: $5,000- Annual indirect costs: $1,000- Direct cost for repair bay use: 180 times * $30 = $5,400- Direct cost for paint bay use: 162 times * $20 = $3,240Total costs = $5,000 + $1,000 + $5,400 + $3,240 = $14,640Net income = Revenue - Total costs = $50,000 - $14,640 = $35,360However, since none of the provided choices match the calculated net income, it seems there might have been a misunderstanding in the calculation or interpretation of the provided choices. The correct approach involves calculating the total revenue and subtracting all associated costs to find the net income. Given the discrepancy, it's important to carefully review the calculation steps and the assumptions made.
Learning Objectives
- Learn about different strategies for revenue recognition and their application.
- Familiarize oneself with the cost implications of durable contracts and the process of their recognition.