Reference no: EM132909292
Question - Grouper Industries manufactures sump-pumps. Its most popular product is called the Super Soaker, which has a retail price of $1,100 and costs $590 to manufacture. It sells the Super Soaker on a standalone basis directly to businesses. Grouper also provides installation services for these commercial customers, who want an emergency pumping capability (with regular and back-up generator power) at their businesses. Grouper also distributes the Super Soaker through a consignment agreement with Menards. Income data for the first quarter of 2020 from operations other than the Super Soaker are as follows.
Revenues $9,071,000
Expenses 7,908,000
Grouper has the following information related to two Super Soaker revenue arrangements during the first quarter of 2020.
1. Grouper sells 30 Super Soakers to businesses in flood-prone areas for a total contract price of $51,600. In addition to the pumps, Grouper also provides installation (at a cost of $160 per pump). On a standalone basis, the fair value of this service is $190 per unit installed. The contract payment also includes a $10 per month service plan for the pumps for 3 years after installation (Grouper's cost to provide this service is $8 per month). The Super Soakers are delivered and installed on March 1, 2020, and full payment is made to Grouper. Any discount is applied to the pump/installation bundle.
2. Grouper ships 330 Super Soakers to Menards on consignment. By March 31, 2020, Menards has sold two-thirds of the consigned merchandise at the listed price of $1,100 per unit. Menards notifies Grouper of the sales, retains a 5% commission, and remits the cash due Grouper.
Required - Determine Grouper Industries' 2020 first-quarter net income. (Ignore taxes.)