Hydra Aire, Inc., sells appliances to Seasons Department Store. A recent order requires Hydra...
Question:
Hydra Aire, Inc., sells appliances to Seasons Department Store. A recent order requires Hydra Aire to manufacture and deliver 500 toasters at a price of $100 per unit. Hydra Aire's manufacturing costs are approximately $40 per unit. The following schedule summarizes the production and delivery record of Hydra:
| Year | 1 | 2 | 3 | Total |
| Toasters produced | 200 | 200 | 100 | 500 |
| Costs incurred | $8,000 | $8,000 | $4,000 | $20,000 |
| Toasters delivered | 150 | 200 | 150 | 500 |
| Cash received | $10,000 | $15,000 | $20,000 | $45,000 |
a. Assuming that Hydra Aire recognizes revenue when the toasters are produced, how much revenue should be recognized in each of the three years?
b. Assuming that Hydra Aire recognizes revenue at delivery, how much revenue should be recognized in each of the three years?
Production cost per unit:
It is the cost which represents the amount incurred for the manufacturing of single product and it is considered all the cost whether it is directly associated or not. It helps the management to set the selling price per unit.
Answer and Explanation: 1
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{eq}\begin{align*} {\rm\text{Revenue Recognized in Year 1 under Case a}} &= {\rm\text {Number of Toasters Produced}} \times {\rm\text...
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What is Revenue Recognition? - Principles, Process & Examples
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Chapter 7 / Lesson 2
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Revenue recognition states that revenue is recorded when it is realized, or realizable and earned, as opposed to received. Learn about the principles and process of revenue recognition with examples of recognition criteria before exploring some exceptions to the rule.
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