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Evgen [1.6K]
4 years ago
9

Item 7Item 7 Orange Inc. offers a discount on an extended warranty on its oPhone when the warranty is purchased at the time the

oPhone is purchased. The warranty normally has a price of $140, but Orange offers it for $115 when purchased along with an oPhone. Orange anticipates a 75% chance that a customer will purchase the extended warranty along with the oPhone. Assume Orange sells to 1,000 oPhones with the extended warranty discount offer. What is the total stand-alone selling price that Orange would use for the extended warranty discount option for purposes of allocating revenue among the performance obligations in those 1,000 oPhone contracts? Multiple Choice $0 $25,000 $115,000 $18,750
Business
1 answer:
Troyanec [42]4 years ago
6 0

Answer:

$18,750

Explanation:

Discountonwarranty=Priceofwarranty−Offerprice

=$140−$115

=$25

TotalSellingpriceallocatedtowarranty=Estimatedwarrantyunitspurchased×

Discountonwarranty

=750×$25

=$18,750

​  

​

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