Supplier Corp. enters into a government contract during the year to provide computer equipment for...
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Supplier Corp. enters into a government contract during the year to provide computer equipment for $4,400,000. The contract consists of a single performance obligation to provide specified equipment in three years. Total costs estimated by Supplier Corp. for the contract are $3,080,000. The equipment is highly specialized and has no alternative uses. As negotiated in the contract, any costs incurred by Supplier Corp. plus a specified profit margin will be paid to Supplier Corp. in the event of a contract cancellation. Actual costs incurred during the first year of the contract were $1,408,000 including unexpected cost overruns of $176,000 due to labor inefficiencies.
Assume that at the end of the second year of the contract, the estimate of total costs has increased to $3,300,000 million due to an increase in cost of materials. Actual costs incurred to date are $2,475,000, excluding year one inefficiencies.
a. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded in the second year of the contract. b. Calculate (1) cumulative recognized revenue, (2) cumulative gross profit, and (3) cumulative adjusted contract margin at the end of the second year of the contract.
Assume that at the end of the second year of the contract, the estimate of total costs has increased to $3,300,000 million due to an increase in cost of materials. Actual costs incurred to date are $2,475,000, excluding year one inefficiencies.
a. Calculate (1) recognized revenue, (2) the gross profit, and (3) adjusted contract margin to be recorded in the second year of the contract.
b. Calculate (1) cumulative recognized revenue, (2) cumulative gross profit, and (3) cumulative adjusted contract margin at the end of the second year of the contract.
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