This question uses the same TGX Global data as the previous question, repeated below: TGX Global sells excavators, with an average sale price of $500,000 per excavator.
TGX received new orders for 90 excavators in 2018.
TGX produced & delivered 120 excavators in 2018: 50 excavators were ordered in 2017 and the rest (70 excavators) were ordered in 2018.
TGX received payment for 110 excavators.
TGX began selling 1-year maintenance services contracts for $50,000 per excavator in 2018, which begin after the excavator is delivered. Contracts were sold on 50% of all excavator orders made in 2018 (no contracts were sold on orders placed in 2017).
Assume now that instead of the revenue recognized in the previous question, TGX recognized $50 million in revenue for 100 excavators (and assume no maintenance contract revenue was recognized). In addition, the following occurred in 2018:
TGX recognized $2 million in shipping and delivery costs for its excavators.
TGX recognized $6 million in direct labor expenses.
TGX recognized $3 million in commissions paid to its salespeople for selling the excavators.
TGX purchased $60 million in raw materials in 2018, of which $50 million was in cash.
Raw materials required to assemble each excavator cost $300,000 per excavator.
Calculate TGX’s 2018 gross profit based on the transactions described above.
A. $(15.0 million)
B. $9.0 million
C. $12.0 million
D. $14.0 million
E. $18.0 million