Video Planet ("VP") sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer’s home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $1,750 and sells the remote separately for $100, and offers the entire package for $1,900. VP does not sell the installation service separately. VP is aware that other similar vendors charge $150 for the installation service. VP also estimates that it incurs approximately $100 of compensation and other costs for VP staff to provide the installation service. VP typically charges 40% above cost on similar sales.

Required:
Calculate the stand-alone price of the installation service using each of the following approaches.
a. adjusted market assessment
b. expected cost plus margin
c. residual

Question

contestada

Respuesta :

olatunjiolorundare20 olatunjiolorundare20 · Answer 1 · 2020-02-26T06:51:21+01:00

Answer:A)Adjusted market assessment=$150

B)Expected cost plus margin=$140

C) residual margin=$50

Explanation:the adjusted market assessment will be $150 since that is what similar services are rendered in the industry.

The expected cost plus margin can be calculated by 140%×100=$140.

The cost of installation as calculated by the company is $100.

The residual is calculated by $1900-$1750-$100=$50.

1900 is the total cost of the package,while $1750 is the cost of TV alone ,$100 represent the cost of remote.