Question

Accorsi & Sons specializes in selling and installing upscale home theater systems. On March 1, 2021, Accorsi sold a premium home theater package that includes a projector, set of surround speakers, and high quality leather seats, along with complete installation service, for $33,500. If sold separately, each of these goods or services would have cost $19,500 (projector), $17,000 (speakers), $22,000 (seats), and $4,000 (installation), respectively. Required: How much of the transaction price would be allocated to the projector, the speakers, the leather seats, and the installation service, assuming that each of these four parts of the contract is a separate performance obligation? (Round the percentage values to 2 decimal places.)

Answer 1

Answer:

Accorsi & Sons will have to identify each obligation’s share of the sum of the stand-alone selling prices of all performance obligations:

Projector:  $\frac{15,000}{15,000 + 12,500 + 17,500 + 3,000}$ *100 = 31.25%  

Surround speakers:  $\frac{12,500}{15,000 + 12,500 + 17,500 + 3,000}$ *100 = 26.04%    

Leather seats:  $\frac{17,500}{15,000 + 12,500 + 17,500 + 3,000}$ *100 = 36.46%  

Installation service: $\frac{3,000}{15,000 + 12,500 + 17,500 + 3,000}$ *100 = 6.25%

Accorsi & Sons would allocate the total selling price of $33,500 based on the stand-alone selling prices, as shown below:

Projector: $33,500 × 31.25% = $10,468.75

Surround speakers: $33,500 × 26.04% = $8,723.40

Leather seats: $33,500 × 36.46% = $12,214.10

Installation service: $33,500 × 6.25% = $2,093.75

Total: $10,468.75  + $8,723.40  +  $12,214.10  + $2,093.75   = $32,500 = 100%