Video Planet (VP) sells a big screen TV package consisting of a 60-inch plasma TV, a universal remote, and on-site installation by VP staff. The installation includes programming the remote to have the TV interface with other parts of the customer’s home entertainment system. VP concludes that the TV, remote, and installation service are separate performance obligations. VP sells the 60-inch TV separately for $1,500, sells the remote separately for $200, and offers the installation service separately for $300. The entire package sells for $1,900.How much revenue would be allocated to the TV, the remote, and the installation service?

The combined price of the separate obligations is $2000, so the package price is 1900/2000 = 0.95 of the total of separate items. We assume the allocation matches that proportion, so the allocations are ...

TV: 0.95×$1500 = $1425

remote: 0.95×$200 = $190

installation: 0.95×$300 = $285

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AFOKE88 AFOKE88 · Answer 2 · 2021-10-05T12:35:29+02:00

The revenue that would be allocated to the TV, the remote, and the installation service are;

New revenue for TV = $1425

New revenue for remote = $190

New revenue for installation= $285

We are given the cost for individual obligations as;

Cost of 60-inch TV = $1,500

Cost of remote = $200

Installation service cost = $300

Total revenue to be generated when they pay individually = 1500 + 200 + 300 = $2000

Now, we are told that the entire package when done together instead of individually will generate a revenue of $1,900 when sold.

This means, the discount here is; 1900/2000 × 100 = 95% or 0.95

Now, based on this discount of 95%, we can calculate the revenue that will be generated from amount allocated to each obligation based on the entire package deal;

New revenue for TV: 0.95 × $1500 = $1425

New revenue for remote: 0.95 × $200 = $190

New revenue for installation: 0.95 × $300 = $285

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