Question

Verma, Inc. sells office furniture. In 2021, it sold 200 desks for $500 each. For each desk sold, Verma distributed a 50% discount coupon for purchase of an office chair within one month. Based on historical experience, Verma expects that approximately 20% of the coupons will be utilized. The chairs purchased with the coupons are priced at $150 and normally discounted 10%. What would be the stand-alone sales price used by Verma for the coupon when allocating the $500 transaction price to performance obligations

Answer 1

Answer:

$12

Explanation:

The standalone price is the price at which the seller (Verma) would sell its products or services (discount coupon) separately to other customers.

to determine the standalone price of the discount coupon we must multiply the change in discount by the expected use of the coupons:

• change in discount = $150 x (50% - 10%)  = $150 x 40% = $60
• expected use = 20%

= $60 x 20% = $12