REH sells architectural designs to clients. In 2020, the company sold 120 designs for P3,600,000. For...

 

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REH sells architectural designs to clients. In 2020, the company sold 120 designs for P3,600,000. For each design sold, REH distributed a 40% discount coupon for any additional design purchased within the next 12 months. Based on historical experience, REH expects that approximately 30% of the coupons will be utilized, and the goods purchased with the coupons would normally sell for P35,000. Determine the sales revenue for this transaction, assuming that REH uses the residual method to estimate the stand-alone selling price of the designs sold without the discount coupons. REH sells architectural designs to clients. In 2020, the company sold 120 designs for P3,600,000. For each design sold, REH distributed a 40% discount coupon for any additional design purchased within the next 12 months. Based on historical experience, REH expects that approximately 30% of the coupons will be utilized, and the goods purchased with the coupons would normally sell for P35,000. Determine the sales revenue for this transaction, assuming that REH uses the residual method to estimate the stand-alone selling price of the designs sold without the discount coupons.

Answer rating: 100% (QA)

To use the residual method we need to first estimate the standalone selling price SSP of the designs ... View the full answer