- January 29, 2022 at 5:24 pm #647712soohaParticipant
- Topics: 31
- Replies: 30
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.
How should the transaction price be allocated between the machine
and the technical support?
could you help with this questionFebruary 2, 2022 at 7:30 pm #648004P2-D2Keymaster
- Topics: 4
- Replies: 6440
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.
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