Question

Aria Perfume, Inc., sold 3,210 boxes of white musk soap during January of 2021 at the price of $90 per box. The company offers a full refund to unsatisfied customers for any product returned within 30 days from the date of purchase. Based on historical experience, Aria expects that 3% of sales will be returned. How many performance obligations are there in each sale of a box of soap

Answer 1

Answer:

Aria Perfume, Inc.

There are two performance obligations involved in each sale of a box of soap.

Explanation:

a) Data and Calculations:

Number of boxes of white musk soap sold during January 2021 = 3,210

Sales price per box = $90

Performance Obligations:

Sale of box = $87.30 (97%)

Refund for returned boxes = $2.70 (3%)

Total Sales revenue to be accounted for = $280,233

Total refund expense to be accounted for =  $8,667

Cash receipts should total =                       $288,900

b) The performance obligations are for the sale of a box of soap (97%) and refund (3%).  With a sales price of $90 per box, the sales obligation should be $87.30 per box, while the refund obligation has $2.70 per box, which must be provided and accounted for separately.