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 V staff. The install system. VP concludes that the TV, remote, and installation service are separate performance obligations. Vp sells the 60-inch TV separately for $2125, sells the remote separately for $125, and offers the installation service separately for $250. The entire package ation includes programming the remote to have the TV interface with other parts of the customer's home entertainment sells for $2,400.

 Required:

 How much revenue would be allocated to the TV, the remote, and the installation service? 

Answer 1

Selling price of entire package = $2,400

Selling price of TV = $2,125

Selling price of remote = $125

Installation fee = $250

Selling price of entire package i.e. $2,400 will be divided in the selling price ratio of TV, remote and installation service.

Selling price ratio = TV : Remote : Installation service

= 2,125 : 125 : 250

= 17 : 1 : 2

Hence, revenue allocated to TV = 2,400 x 17/20

= $2,040

Revenue allocated to remote = 2,400 x 1/20

= $120

Revenue allocated to installation service = 2,400 x 2/20

= $240

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