Question

Denver Company engages Public Company to produce a large machine, install the machine, and train their employees on the machine. The machine, installation, and training are distinct, and Public determines that the contract includes three separate performance obligations. The machine, installation, and training typically cost $800,000, $100,000, and $100,000 respectively when each is provided in a separate contract. Denver and Public agree to a total contract price of $920,000. How much of the contract price should Public allocate to the machine, installation, and training, respectively

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

Machine= $800,000

Installation= $100,000

Training= $100,000

Total= 1,000,000

Denver and Public agree to a total contract price of $920,000.

First, we will determine the sales proportion:

Machine= 800,000/1,000,000= 0.8

Installation= 100,000/1,000,000= 0.1

Training= 100,000/1,000,000= 0.1

Now, we can allocate the price to each one:

Machine= 920,000*0.8= 736,000

Installation= 920,000*0.1= 92,000

Training= 920,000*0.1= 92,000