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20 April, 09:53

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 staff. 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 $2,040, sells the remote separately for $120, and offers the installation service separately for $240. The entire package sells for $2,300. Required: How much revenue would be allocated to the TV, the remote, and the installation service?

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  1. 20 April, 10:23
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    60-inch TV = $1,955

    the remote control = $115

    the installation service = $230

    Explanation:

    if someone purchased the items included in the package separately, they would cost:

    60-inch TV $2,040

    the remote control $120

    the installation service $240

    total $2,400

    we must determine the weighted average of each item:

    60-inch TV ($2,040/$2,400) x 100 = 85%

    the remote control ($120/$2,400) x 100 = 5%

    the installation service ($240/$2,400) x 100 = 10%

    now we multiply by the package's price:

    60-inch TV 85% x $2,300 = $1,955

    the remote control 5% x $2,300 = $115

    the installation service 10% x $2,300 = $230
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