Swifty Appliance Center is an experienced home appliance dealer.
Swifty Appliance Center also offers a number of services for the
home appliances that it sells. Assume that Swifty Appliance Center
sells ovens on a standalone basis. Swifty Appliance Center also
sells installation services and maintenance services for ovens.
However, Swifty Appliance Center does not offer installation or
maintenance services to customers who buy ovens from other vendors.
Pricing for ovens is as follows.
Oven only | $800 | |
Oven with installation service | 870 | |
Oven with maintenance services | 960 | |
Oven with installation and maintenance services | 990 |
In each instance in which maintenance services are provided, the
maintenance service is separately priced within the arrangement at
$160. Additionally, the incremental amount charged by Swifty
Appliance Center for installation approximates the amount charged
by independent third parties. Ovens are sold subject to a general
right of return. If a customer purchases an oven with installation
and/or maintenance services, in the event Swifty Appliance Center
does not complete the service satisfactorily, the customer is only
entitled to a refund of the portion of the fee that exceeds
$800.
Assume that a customer purchases an oven with both installation and
maintenance services for $990.
(b) Indicate the amount of revenue that should be
allocated to the oven, the installation, and to the maintenance
contract. (Do not round intermediate calculations.
Round final answers to 2 decimal places.)
Oven | $
|
|
Installation | $
|
|
Maintenance | $
|
ANSWER:
Allocation | ||
oven | 800 | 800*990/1030= 768.93 |
Installation | 70 | 70*990/1030= 67.28 |
Maintenance | 160 | 160*990/1030= 153.78 |
1030 | 990 |
when oven is sold with maintenance then price of oven = 960-160 = 800
oven when sold with installation : 870-800 =70 is the cost of installation
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