Question

Minarski Electronics sells computers and provides hardware maintenance services. On April 1st, Minarski sold a package deal containing a computer and a one-year unlimited maintenance/repair service for the computer at a bundle price of $1,000. If sold separately, the computer costs $804 and the one-year unlimited maintenance/repair service costs $396. How much revenue does Minarski Electronics recognize for the month ended April 30th, assuming that revenue is accrued monthly?

Answer 1

Answer:

Revenue to be recognized for the month of April = $697.5

Explanation:

Provided cost of computer alone = $804

Cost of service = $396

Total Cost individually = $1,200

Share of Computer in percentage = $804/$1,200 = 67%

Share of maintenance = $396/$1,200 = 33%

Now out of $1,000 of aggregate revenue

Share of computer = $1,000 $\times$ 67% = $670

This amount of revenue shall be recognized in present, on 1st April itself

Annual Maintenance share = $1,000 $\times$ 33% = $330

This amount will be allocated to the entire year on monthly basis = $330/12 = $27.5 for the month of April

Total revenue for month of April = $670 + $27.5 = $697.5