Question $14$

$3$ pts

Patterson Technology developed a state$-$of$-$the$-$art virtual reality system. Patterson sold their new system to Sapphire Corp for a flat fee of $$40,000.$ Included in the package was:

Standardized hardware $($sold on a stand$-$alone basis for $$30,000)$

Customized installation and integration into existing gaming systems.

Patterson estimates the standalone fair value of the installation to be cost plus $40\%$ profit margin

The total installation cost is estimated to be $$10,000$

Six$-$week training session not sold separately. Based on a study of similar courses, the average cost was $$1,000$ per week

What amount of the transaction price should be allocated to the installation?

$$14,000$

$$10,000$

$$11,200$

$$17,500$