Question: Combining multiple contracts (LO 3-2, LO 3-3, LO 3-4) Teuvo Company entered into two contracts on the same date with Rundblad Corporation. Teuvo has provided

Combining multiple contracts (LO 3-2, LO 3-3, LO 3-4)

Teuvo Company entered into two contracts on the same date with Rundblad Corporation. Teuvo has provided the following analysis of price and cost for the contracts:

Contract A

Contract B

Combining multiple contracts (LO 3-2, LO 3-3, LO 3-4) Teuvo Company entered

You inquired about why Teuvo would have agreed to make a sale at a loss. The companys controller indicated that the company felt the profit on Contract A was sufficient to justify selling at a loss on Contract B, and it viewed the two contracts, together, as sufficiently profitable. We normally get $85,000 for the goods in Contract A and $60,000 for the goods in Contract B, so we were happy with the transactions, but this is how the customer wanted to structure them.

Required:

What amount of revenue should Teuvo associate with each of the contracts?

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