Entity M, a parts supplier, enters into a contract with an OEM (i.e., M’s customer) for fixed consideration of $30 million to (1) construct equipment for the customer that M will use to make parts for the customer and (2) supply 30 million parts to the customer.

• Legal title of the equipment transfers to the customer upon completion of the construction of the equipment (i.e., prior to M beginning production of the parts).

• M is one of many companies that have the ability to both construct the equipment and subsequently produce the parts.

How many performance obligations does the contract have? Explain.

Answer rating: 100% (QA)

A performance obligation is defined as a promise to provide a distinct good or service to a customer ... View the full answer