Exercise 18-15 Your answer is incorrect. Try again Flounder Appliance Center is

Question

Exercise 18-15 Your answer is incorrect. Try again Flounder Appliance Center is an experienced home appliance dealer. Flounder Appliance Center also offers a number of services for the home appliances that it sells. Assume that Flounder Appliance Center sells ovens on a standalone basis. Flounder Appliance Center also sells installation services and maintenance services for ovens. However, Flounder 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 Oven with installation service Oven with maintenance services Oven with installation and maintenance services 840 980 980 In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $190. Additionally, the incremental amount charged by Flounder 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 Flounder Appliance Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $790 Assume that a customer purchases an oven with both installation and maintenance services for $980 (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 755 Installation Maintenance 167 Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

$980

Individual(fair value) FMV(%) Total sales price revenue allocate Oven $790 76.70% $980 $751.66 Oven with installation service ($840 - $790) $50 4.85% $980 $47.53 Oven with maintenance service ($980 - $790) $190 18.45% $980 $180.81 Total fair value $1030

$980

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