GX Global sells excavators, with an average sale price of $500,000 per excavator

Question

GX Global sells excavators, with an average sale price of $500,000 per excavator. TGX received new orders for 90 excavators in 2018. TGX produced & delivered 120 excavators in 2018: 50 excavators were ordered in 2017 and the rest (70 excavators) were ordered in 2018. TGX received payment for 110 excavators. TGX began selling 1-year maintenance services contracts for $50,000 per excavator in 2018, which begin after the excavator is delivered. Contracts were sold on 50% of all excavator orders made in 2018 (no contracts were sold on orders placed in 2017). Assume now that instead of the revenue recognized in the previous question, TGX recognized $50 million in revenue for 100 excavators (and assume no maintenance contract revenue was recognized). In addition, the following occurred in 2018: TGX recognized $2 million in shipping and delivery costs for its excavators. TGX recognized $6 million in direct labor expenses. TGX recognized $3 million in commissions paid to its salespeople for selling the excavators. TGX purchased $60 million in raw materials in 2018, of which $50 million was in cash. Raw materials required to assemble each excavator cost $300,000 per excavator. Calculate TGX’s 2018 gross profit based on the transactions described above.

A. $(15.0 million)

B. $9.0 million

C. $12.0 million

D. $14.0 million

E. $18.0 million

Explanation / Answer

- 12 million

gross profit =

The calculation of gross profit is a multi-step process, as outlined below:

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.