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Hi i understand this question mostly. But I would appreciate some explaining and also in the answer kit of the Kaplan ST they have mentioned that the customer would receive a bundle discount of 33%. They calculated it as : $25000/$75000. My question is about the $25000. Is this just an estimate or does it have a calculation. Please explain. Thank you!
Q.) Shinji Co sells a machine and one year’s free technical support for $50000. It usually sells the machine for $60000 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 $10000.
How should the transaction price be allocate between the machine and the technical support?
This question is from the Kaplan ST Chapter 11- TYU2.
Hi,
It is a tricky one given the way the question is phrased. What we need to do is to find the standalone selling prices of the machine and support service. We’re given the selling price of the machine at 60,000 in the question. the support service standalone selling price is calculated from the cost and mark-up given in the question. The cost is the 10,000 and the mark -up is 50%, so applying this to the 10,000 gives us 15,000. The total standalone price of the two combined (the bundle) is therefore 75,000 (60,0000 machine + 15,000 support services).
We are only paying 50,000 for the two combined (the bundle) so are receiving a 25,000 discount overall (that being the difference between 75,000 and 50,000).
Hope that helps.
Thanks
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