Minor Music sells a product that contains two performance obligations: the Maestro keyboard and the Maestro teaching
Question:
Minor Music sells a product that contains two performance obligations: the Maestro keyboard and the Maestro teaching software. The Maestro keyboard has a stand-alone selling price of $350. Minor Music sells both the Maestro keyboard and teaching software as a package deal for $500. The Maestro teaching software is not sold separately. Minor Music is aware that teaching software can be purchaed from other vendors for $200. Minor Music prices are generally 10% lower than what is charged by those vendors. Minor Music estimates that it incurs costs of approximately $100 per copy of the teaching software and usually charges 55% above cost on similiar products.
a) Estimate the stand-alone selling price of the software using the residual approach.
b) Estimate the stand-alone selling price of the software using the adjusted market assessment approach.
c) Estimate the stand-alone selling price of the software using the expected cost plus margin approach.
Industrial Organization Markets and Strategies
ISBN: 978-1107069978
2nd edition
Authors: Paul Belleflamme, Martin Peitz