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 Estaff. 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 $2,050 and sells the remote separately for $250, and offers the entire package for $2,500. VP does not sell the installation service separately. VP is aware that other similar vendors charge $300 for the installation service. VP also estimates that it incurs approximately $250 of compensation and other costs for VP staff to provide the installation service. VP typically charges 40% E above cost on similar sales. Required: 1. to 3. Calculate the stand-alone selling price of the installation service using each of the following approaches. Stand-Alone Selling Price Adjusted market assessment Expected cost plus margin Residual

Answer 1

300 stand alone prices -answers adjusted market assessment expected cost plus margin =250+(250*40%) residual = entire package -TV saperately - remote saperately=2500-2050-250 350 2001 adjusted market assessment price is the stand alone price of other competitors charged expected cost plus margin = service (installation )+profit margin