Wright Development purchases, develops, and sells commercial building sites. As the sites are sold, omMeWon, they are
Question:
Wright Development purchases, develops, and sells commercial building sites. As the sites are sold, omMeWon, they are cleared at an average cost of \($3,000\) per site. Storm drains and driveways are also installed at an average cost of \($5,500\) per site. Selling costs are 10 percent of sales price. Administrative costs are
\($425,000\) per year. During 2016, the company bought 1,000 acres of land for \($5,000,000\) and divided it into 200 sites of equal size. The average selling price per site was \($90,000\) during 2016 when 50 sites were sold. During 2017, the company purchased and developed another 1,000 acres, divided into 200 sites. The purchase price was again \($5,000,000\). Sales totaled 300 sites in 2017 at an average price of
$90,000.
Required
a. Prepare 2016 and 2017 functional income statements using absorption costing.
b. Prepare 2016 and 2017 contribution income statements using variable costing.
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