Tau Limited is a manufacturing business that sales high quality kitchen electronic products. Tau Limited has just entered into 25 lucrative contracts with customers in the SADC region. Each of the contacts includes the sale of one product for P3,000. To manufacture each of these products it cost Tau P2 000 a product. In the contacts, one of the terms is that cash is received upfront and control of the product transfers on delivery. Furthermore, customers can return the product within 30 days to receive a full refund. Tau still has an option of selling the returned products for profit. Tau Limited has been in business for many years and from his experience he can estimate returns for this product quite accurately. Tau has estimated that that 23 products will not be returned. Required: How should the above transaction be accounted for?
Tau Limited is a manufacturing business that sales high quality kitchen electronic products. Tau Limited has just entered into 25 lucrative contracts with customers in the SADC region. Each of the contacts includes the sale of one product for P3,000. To manufacture each of these products it cost Tau P2 000 a product. In the contacts, one of the terms is that cash is received upfront and control of the product transfers on delivery. Furthermore, customers can return the product within 30 days to receive a full refund. Tau still has an option of selling the returned products for profit. Tau Limited has been in business for many years and from his experience he can estimate returns for this product quite accurately. Tau has estimated that that 23 products will not be returned. Required: How should the above transaction be accounted for?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
Problem 6E: Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of...
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- Tau Limited is a manufacturing business that sales high quality kitchen electronic products. Tau Limited has just entered into 25 lucrative contracts with customers in the SADC region. Each of the contacts includes the sale of one product for P3,000. To manufacture each of these products it cost Tau P2 000 a product. In the contacts, one of the terms is that cash is received upfront and control of the product transfers on delivery. Furthermore, customers can return the product within 30 days to receive a full refund. Tau still has an option of selling the returned products for profit.
Tau Limited has been in business for many years and from his experience he can estimate returns for this product quite accurately. Tau has estimated that that 23 products will not be returned.
Required: How should the above transaction be accounted for?
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