Question

Assume the same facts as in E17 19, except that Rix cannot directly observe the stand alone selling prices of the installation and service contracts. However, Rix has determined that the cost of the installation services is $ 150 and historical margins relative to cost average 20%. Therefore, Rix estimates the standalone selling price of the installation services using an expected cost plus a margin approach. Rix decides to use an adjusted market assessment approach to estimate the selling price of the service contract. Based on information obtained from competitors, Rix determines the average selling price of a similar service contract to be $ 350. servicecontracttobe$350. Rix believes that it has a higher cost structure than its competitors and that it should increase this estimate by 10% to achieve an acceptable margin.
Required:
1. Determine the stand alone selling price of each good or service.
2. How should the transaction price be allocated among the products? ( Round your answer to the nearest dollar.)


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  • CreatedOctober 05, 2015
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