Shinji Co sells a machine and one year’s free technical support for
$50,000. It usually sells the machine for $60,000 but does not sell
technical support for this machine as a stand-alone product. Other
support services offered by Shinji Co attract a mark-up of 50%. It is
expected that the technical support will cost Shinji Co $10,000.
Required:
How should the transaction price be allocated between the machine
and the technical support?
could you help with this question
Allocate the transaction price
4y ago#1Hi,
What specifically do you need help upon? I'd like to see some form of attempt at the question and then I can help you with what you do not understand. Doing it this way improves your learning.
To give you a start though, the key is that we have received $50,000 revenue and that needs to be split between the machine (goods) and the support services. To do this you need to allocate the $50,000 based on the stand alone prices using the $60,000 price of a machine and the cost plus aspect for the services.
Have a go and see how you get on. I'll then check to see if you get it right and if not then I'll point out where you have made the mistake.
Thanks