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Revenue

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Revenue

  • This topic has 1 reply, 2 voices, and was last updated 11 months ago by P2-D2.
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  • January 30, 2022 at 4:00 pm #647742
    sooha
    Participant
    • Topics: 31
    • Replies: 30
    • ☆☆

    jenson Co owns the rights to a fast food franchise. On 1 April 20X4 it sold the right to open a new outlet to Mr Verstappen. The franchise is for five years. Jenson Co received an initial fee of $50,000 for the first year and will receive $5,000 per annum thereafter. Jenson Co has continuing service obligations on its franchise for advertising and product development that mount to approximately $8,000 per annum for each franchised outlet. A reasonable profit margin on the provision of the continuing services is deemed to be 20% of revenues received.

    please help in the answer it mentioned that the profit in the 20 % for year 1 and approximately 46 %
    how to get these figure i don’t understand ?

    February 2, 2022 at 7:35 pm #648006
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6440
    • ☆☆☆☆☆

    Hi,

    They will have used the stage of completion based upon costs to work out the figure. They have incurred costs of $8,000 this year and the total costs would be $40,000 ($8,000 x 5 years). The 8/40 x 100% gives the 20%.

    Thanks

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