Holiday sells a 12 Days of Christmas light display set. Each of the “days” is re
ID: 2599957 • Letter: H
Question
Holiday sells a 12 Days of Christmas light display set. Each of the “days” is represented by a lighted display that measures a minimum of 30 feet by 35 feet. Customers can buy just the displays but can also purchase installation (set-up), and an annual maintenance package. Some companies purchase the installation on an annual basis. The details of the 12 Days Displays is as follows:
Selling price of the set of light displays $82,000 (cost $56,000)
Selling price of the installation alone $ 5,000 per year (cost $1,100)
Selling price of the annual maintenance pkg. $ 900 per year (cost $200)
Selling price of the package with all three $80,000
During 2017, Holiday sold 20 packages, 6 light displays, 4 installations and 12 maintenance agreements. The installation cost is all associated with wages expense while the maintenance cost consists of 20% wages expense and 80% inventory of parts (bulbs, fuses, replacement frame parts, etc.). During 2017 85% of the installations took place and 30% of the maintenance occurred.
Prepare appropriate analysis and journal entries
Explanation / Answer
DISPLAY ONLY
INSTALLATION ONLY
ANNUAL MAINTENANCE
PURCHASE OF
ALL THREE
$
$
$
$
SALES
82000
5000
900
80000
COST OF SALES
56000
1100
200
67200
MARGIN
26000
3900
700
12600
COST BASE
WAGES
20% WAGES
80% INVENTORY
26000 X 6
52000
3900 X 4=
15600
700 X 12=
8400
12600 X 20=
252000
X 85%
X 30%
NET MARGIN
52000
13260
2520
252000
ORDER OF PROFITABILITY
2ND
3RD
LAST
1ST
%
16%
4%
1%
79%
TOTAL PROFIT
319,780
JOURNALS
DETAILS
$
DEBIT A/C
CREDIT A/C
2122800
CASH
492000
DISPLAY REV
20000
INSTALLATION REV
10800
MAINTENANCE REV
1600000
PACKAGE REV
336000
DISPLAY REV
4400
INSTALLATION REV
2400
MAINTENANCE REV
252000
PACKAGE REV
291800
CASH
DISPLAY ONLY
INSTALLATION ONLY
ANNUAL MAINTENANCE
PURCHASE OF
ALL THREE
$
$
$
$
SALES
82000
5000
900
80000
COST OF SALES
56000
1100
200
67200
MARGIN
26000
3900
700
12600
COST BASE
WAGES
20% WAGES
80% INVENTORY
26000 X 6
52000
3900 X 4=
15600
700 X 12=
8400
12600 X 20=
252000
X 85%
X 30%
NET MARGIN
52000
13260
2520
252000
ORDER OF PROFITABILITY
2ND
3RD
LAST
1ST
%
16%
4%
1%
79%
TOTAL PROFIT
319,780
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