Question

4 Your answer is incorrect. Waterway Appliance Center is an experienced home appliance dealer. Waterway Appliance Center also offers a number of services for the home appliances that it sells. Assume that Waterway Appliance Center sells ovens on a standalone basis. Waterway Appliance Center also sells installation services and maintenance services for ovens. However, Waterway 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 $810 Oven with installation service 870 Oven with maintenance services Oven with installation and maintenance services 1,020 990 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $180. Additionally, the incremental amount charged by Waterway 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 Waterway Appliance Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $810. Assume that a customer purchases an oven with both installation and maintenance services for $1,020. (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 to Installation $ Maintenance $

Answer 1

В Standalone price 8101 Oven 3 Installation [870-810] Maintenance Total standalone price 6 7 b)Allocation of revenue : 60 1801 1050 5 10 Oven 11 Installation 12 Maintenance Price* standalone price /Total of standalone price 1020* 810/1050= 786.86 1020*60/1050= 58.28 1020*180/1050= 174.86