Intermediate $2$ FSR Project Part #$2$: Revenues

While the company has historically kept this production process in$-$house, they have recently been

approached by a local university with a request to provide a set of machinery that the university can

use to produce their own specialty bags. Since many members of Saola$$s Board of Directors $($and

several large shareholders$)$ are alumni of this university, Saola$$s management has decided that they

will go through with the sale of a three machine system to the university.

As part of the deal, Saola$$s management has insisted that the university also purchase a maintenance

contract $($which will begin as soon as the last machine is installed$).$ This requirement will allow Saola$$s

engineers and machinists to take care of the equipment, reducing the chance of losing their

competitive advantage. The total contract price for the machines and the maintenance contract is

$$920,000.$

As part of the contract, both parties have agreed that the university will have the right to return the

equipment if they are not satisfied with the performance of the machines. Saola will also provide an

additional refund for the maintenance contract if the company returns the equipment within the next