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.

Question

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 $1,500, sells the remote separately for $200, and offers the installation service separately for $300. The entire package sells for $1,900.How much revenue would be allocated to the TV, the remote, and the installation service?

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Lydia 1 week 2021-10-11T20:29:01+00:00 1 Answer 0

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    2021-10-11T20:30:29+00:00

    Answer:

    • TV: $1425
    • Remote: $190
    • Installation: $285

    Step-by-step explanation:

    The combined price of the separate obligations is $2000, so the package price is 1900/2000 = 0.95 of the total of separate items. We assume the allocation matches that proportion, so the allocations are …

      TV: 0.95×$1500 = $1425

      remote: 0.95×$200 = $190

      installation: 0.95×$300 = $285

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