In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $170. Additionally, the incremental amount charged by Cullumber Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation and/o maintenance services, in the event Cullumber Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $790. Assume that a customer purchases an oven with both installation and maintenance services for $909. Based on its experience, Cullumber Center believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately (i.e., the three components are distinct). (b) Indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract. (Do not rou intermediate calculations. Round final answers to O decimal places, e.g. 5,275.)
In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at $170. Additionally, the incremental amount charged by Cullumber Center for installation approximates the amount charged by independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation and/o maintenance services, in the event Cullumber Center does not complete the service satisfactorily, the customer is only entitled to a refund of the portion of the fee that exceeds $790. Assume that a customer purchases an oven with both installation and maintenance services for $909. Based on its experience, Cullumber Center believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer. Assume that the maintenance services are priced separately (i.e., the three components are distinct). (b) Indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract. (Do not rou intermediate calculations. Round final answers to O decimal places, e.g. 5,275.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cullumber Center is an experienced home appliance dealer. Cullumber Center also offers a number of services for the home
appliances that it sells. Assume that Cullumber Center sells ovens on a standalone basis. Cullumber Center also sells installation
services and maintenance services for ovens. However, Cullumber Center does not offer installation or maintenance services to
customers who buy ovens from other vendors. Pricing for ovens is as follows.
Oven only
Oven with installation service
Oven with maintenance services
Oven with installation and maintenance services
Oven
In each instance in which maintenance services are provided, the maintenance service is separately priced within the arrangement at
$170. Additionally, the incremental amount charged by Cullumber Center for installation approximates the amount charged by
independent third parties. Ovens are sold subject to a general right of return. If a customer purchases an oven with installation and/o
maintenance services, in the event Cullumber Center does not complete the service satisfactorily, the customer is only entitled to a
refund of the portion of the fee that exceeds $790.
Installation
Assume that a customer purchases an oven with both installation and maintenance services for $909. Based on its experience,
Cullumber Center believes that it is probable that the installation of the equipment will be performed satisfactorily to the customer.
Assume that the maintenance services are priced separately (i.e., the three components are distinct).
Maintenance
(b) Indicate the amount of revenue that should be allocated to the oven, the installation, and to the maintenance contract. (Do not rou
intermediate calculations. Round final answers to O decimal places, e.g. 5,275.)
LA
$790
782
840
50
960
168
909
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