Question & Answer: Weber Condos Corporation is a small company owned by James Ortiz. It leases three condos of differing sizes to customers as va…..

Weber Condos Corporation is a small company owned by James Ortiz. It leases three condos of differing sizes to customers as vacation facilities. Labor costs for each condo consist of maid service and maintenance cost. Other direct operating costs consist of interest and depreciation. The direct operating costs for each condo follow.

 

Other Direct
Direct Labor Operating Costs
  Condo 1 $ 17,400 $ 43,800
  Condo 2 18,200 43,000
  Condo 3 30,500 60,000
  Total $ 66,100 $ 146,800

 

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     Indirect operating expenses, which amounted to $36,700, are allocated to the condos in proportion to the amount of other direct operating costs incurred for each.

 

Required:
a. Assuming that the amount of rent revenue from Condo 2 is $112,000, what amount of income did it earn? (Do not round intermediate calculations.)

Expert Answer

 

Rent revenue from condo 2 :  $112,000

Expenses for condo-2:

Direct labour : 18200

Direct operating cost : 43000

Indirect operating cost : 36700*43000/146800 = 10750

Total expenses(18200+43000+10750) = 71950

Income earned from condo 2 : 112000-71950

=$40,050

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